Healthcare Realty Trust Incorporated

over to Ron Hubbard, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you for joining us today for Healthcare Realty's third quarter 2025 earnings conference call. A reminder that except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks, and uncertainties. These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. A discussion of risks and risk factors are included in our press release and detailed in our filings with the SEC. Certain non-GAAP financial measures will be discussed on this call. A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the quarter ended September 30, 2025. The earnings press release and earnings supplemental information are available on the company's website. I'd now like to turn the call over to our President and CEO, Pete Scott.

Thanks, Ron. Joining me on the call today are Rob Hall, our COO, and Austin Helfrich, our CFO. Also available for the Q&A portion of the call is Ryan Crowley, our CIO. I wanted to open with some important feedback on the strategic plan. During the course of the third quarter, we met with over 100 investors across trips to Chicago, New York City, Boston and the Mid Atlantic. With the dividend decision behind us, the tone of the meetings differed dramatically from earlier in the year. The excitement around our strategic plan is palpable and the value creation opportunity is significant. The challenge ahead of us is simple to exceed our three year growth framework. To that end, we are assessing every possible opportunity to improve earnings the hard work is already manifesting into better results. Over the last two quarters, same-store NOI growth has averaged 5.25 percent, same-store occupancy has increased 180 basis points, and net debt to EBITDA has been reduced by half a turn. We are also becoming increasingly more positive on the tailwinds for healthcare realty. First, the secular trends in outpatient medical continue to improve with demand far exceeding supply. For the 17th straight quarter, occupancy increased across the top 100 metros and is approaching 93%, an all-time record. Second, our new leasing pipeline continues to grow and stands at 1.1 million square feet. Two-thirds of our pipeline is in the LOI, or lease documentation phase, indicating a high probability of completion. Third, With our improved occupancy levels, we can push harder on lease economics. Our primary focus is no longer on volume, but on economic returns as we seek to maximize retention, escalators, and cash leasing spreads. Fourth, with our rapidly improving leverage profile, for the first time in years, we have capital to invest accretively into our portfolio and we are quickly building up dry powder to go back on offense. Fifth, with the progress we've made on our strategic dispositions, our portfolio is uniquely concentrated within the largest and fastest growing MSAs. When combined with our exceptional health system alignment, these key portfolio attributes should lead to superior operating performance in the quarters and years ahead. Turning to the third quarter, we delivered excellent results with contributions across the platform. With the financial rigor we are instilling in the organization, we are quickly shifting from a company that fell short of expectations to a company that is exceeding them. Normalized FFO was 41 cents per share. We raised both our FFO and same-store guidance, and for the first time since early 2022, Net debt to adjusted EBITDA is below six times. A special thanks to the entire healthcare realty team for their extraordinary efforts this quarter. We followed up a win in the second quarter with a win in the third quarter. That is not an easy thing to do, and the team rose to the challenge. Turning to the transaction market. As evidenced by recent activity, the transaction market for outpatient medical is heating up. A variety of factors are contributing to this, including improving sector fundamentals, a favorable lending market, and strong health system appetite to own strategic real estate. The combination of these favorable dynamics are driving cap rate compression. We are benefiting from these improving trends, and we have reduced the midpoint of the expected cap rate on our dispositions by 25 basis points. We are nearing completion of our lofty disposition initiatives. Year to date, we have sold $500 million of assets at a blended cap rate of 6.5%. Our remaining disposition pipeline, totaling approximately $700 million, is almost entirely under binding contract or LOI. By our next earnings call, we expect to have closed on the vast majority of our remaining dispositions. With every completed transaction, our go-forward NOI growth profile improves, as demonstrated by our strong same-store growth results this quarter. In addition, with the potential for excess balance sheet capacity by year-end, we are monitoring the transaction market for select external investment opportunities that are both strategic to our portfolio and accretive to earnings. We wanted to elaborate more on the cap rates achieved on disposition. Two-thirds of our dispositions, or approximately $800 million, are what we would characterize as non-core assets. We define non-core assets as those located in non-priority markets with suboptimal operating performance and significant capital needs. Non-core assets also include a few legacy office properties. The blended cap rate for these assets is 7.25%. The other one-third of our dispositions, or $400 million, are what we would characterize as core disposition assets. We define core disposition assets as those with good operating performance and high occupancy, but are located in markets where we have limited scale and or an inability to achieve meaningful scale. The blended cap rate for this subset of assets is 5.75%. A good example of a core disposition is our six asset Richmond, Virginia portfolio, which we are under binding contract to sell with an expected mid-November closing. We received unsolicited interest in this portfolio and opted to run a full sales process to maximize value. Final pricing was $171 million, or roughly $425 per square foot, achieving a high 5% cap rate. Richmond is one of our few remaining markets where we utilize third-party property management, and we did not see an opportunity to grow our market share. With an occupancy rate above 93%, average building age of nearly 30 years, and strong tenancy, we believe the cap rate on this portfolio is a good representation of the value embedded within our remaining stabilized portfolio. Turning now to our development and redevelopment platform. We have two projects in our active development pipeline. The All Saints 2 project in Fort Worth, Texas, that is anchored by Baylor Scott & White, and our Macon Pond project in Raleigh, North Carolina, that is anchored by UNC Rec Health. The All Saints 2 project is now 72% leased, up from 54% last quarter, and we recently placed the project into service. The Macon Pond project is 51% pre-leased and we expect to place the project into service in mid-2026. Stabilized NOI from these two projects is expected to be approximately $8 million, providing a source of near-term upside. We see significant opportunity to harvest meaningful upside in our portfolio through targeted ROI-driven investments. During the third quarter, we added five assets into our redevelopment portfolio with a total budget of approximately $60 million. These assets are in strong submarkets and include Nashville, Seattle, Denver, Charlotte, and Dallas. The incremental NOI from these five projects is also expected to be nearly $8 million. In the coming quarters, we expect to have more assets enter the redevelopment pool as we seek to accelerate our capital spend and potential earnings upside. You will note that we enhanced our development and redevelopment disclosures in the supplemental. We have also included a table of our current non-income producing land parcels. We own strategic land parcels in key markets such as Denver, White Plains, Atlanta, Nashville, and Austin with annual carry costs of approximately $1.5 million. We are in the process of assessing each parcel to determine if it makes sense to continue to hold or monetize. In finishing, we are incredibly excited about the future at Healthcare Realty 2.0. Our operating performance is steadily improving. Our transition to an operations-oriented culture is happening faster than anticipated. Our balance sheet initiatives are nearly complete. We are accelerating capital spend into our existing portfolio, and we are rebuilding much needed credibility with the investor community. On my first earnings call, I said we have one overarching objective, to be the first choice for equity investors when they are seeking exposure to outpatient medical. As the only pure play outpatient medical, our undivided attention allows us to singularly focus on this objective every day. Let me turn the call over to Rob, who will expand more on operations and leasing.