NASHVILLE, Tenn., July 31, 2025 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced results for the second quarter ended June 30, 2025.

SECOND QUARTER 2025 HIGHLIGHTS

GAAP Net loss of $(0.45) per share, NAREIT FFO of $0.34 per share, Normalized FFO of $0.41 per share, and FAD of $115.4 million (payout ratio of 96%).
Improved same store operating metrics including cash NOI growth of +5.1%, a 40 bps sequential increase in occupancy to 90%, margin of 64.3%, 83% tenant retention, and +3.3% cash leasing spreads.
Increased Normalized FFO per share guidance $0.01 at the midpoint to $1.57 - $1.61 and increased Same Store Cash NOI growth by +25 bps to 3.25% - 4.00%.
Second quarter new and renewal lease executions totaled 1.5 million square feet including 452,000 square feet of new lease executions.
During the second quarter and through July, completed sales of $182.4 million of assets through 9 separate transactions.
- YTD sales total $210.5 million at a blended 6.2% cap rate
- An additional $700 million of sales are under contract or LOI
Run-rate Net Debt to Adjusted EBITDA of 6.0x; anticipated to be between 5.4x and 5.7x by year end
Received strong support from our lender relationships to extend bank facilities:
- Extended $1.5 billion revolver to mature in July 2030 (inclusive of extension options)
- Added 1 to 2 years of additional extension options on outstanding term loans
Announced a series of leadership and corporate governance changes:
- Peter Scott joined as President and CEO on April 15th and as a director on May 20th
- Board reduced from 12 to 7 members
- Commenced a platform restructuring to drive improved results
- Julie Wilson, EVP - Chief Administrative Officer, to depart the organization by year-end
Published a Strategic Plan highlighting the decisive actions being taken by new leadership to maximize value for shareholders.
Board unanimously approved a common stock dividend in the amount of $0.24 per share.

SECOND QUARTER 2025 RESULTS

	THREE MONTHS ENDED
	JUNE 30, 2025						JUNE 30, 2024
(in thousands, except per share amounts)	AMOUNT			PER SHARE			AMOUNT			PER SHARE
GAAP Net loss	$	(157,851	)	$	(0.45	)	$	(143,780	)	$	(0.39	)
NAREIT FFO, diluted	$	120,371		$	0.34		$	123,797		$	0.33
Normalized FFO, diluted	$	143,736		$	0.41		$	143,500		$	0.38

LEASING ACTIVITY

During the second quarter, the Company executed 341 new and renewal leases for 1.5 million square feet.

Weighted average lease term of 5.3 years with an average annual escalator of 3.2%.
Health system leasing made up approximately 33% of our signed lease volume in the quarter.

Key leasing highlights:

Houston, TX. 24,000 square foot new lease at our on-campus redevelopment in Houston with CLS Health, a premier multi-specialty group aligned with HCA's North Cypress hospital.
Orange County, CA. 23,000 square foot new lease with UC Irvine Health. UC Irvine Health recently purchased the adjacent hospital from Tenet and is investing in the growth of the campus.
Houston, TX. 42,000 square foot renewal in Houston with Texas Children's Pediatrics.

DISPOSITION PROGRESS

During the second quarter and through July, the Company completed asset sales of $182.4 million through nine separate transactions. A summary of the significant completed transactions is as follows:

Yakima, WA. Completed strategic market exit of the Yakima, WA MSA with the $31 million sale of two single-tenant MOBs to the affiliated health system. The sale achieved top of market pricing while avoiding costly tenant improvement allowances associated with a master lease renewal.
Houston, TX. Disposed of a land parcel for $10.5 million previously intended for future development. The property was sold to the affiliated health system and was in a submarket where the Company owns no other properties.
South Bend, IN. Completed its strategic market exit of the South Bend, IN MSA with the $43.1 million sale of a consistently under-occupied MOB to the affiliated health system.
Milwaukee, WI. Disposed of two single-tenant, off-campus MOBs to a private market purchaser for $42 million. The Company achieved attractive disposition economics while partially exiting this noncore market.
New York, NY. Targeted sale of an under-occupied property with a short ground lease term to the affiliated health system for $25 million. The Company was able to harvest maximum value for a noncore asset.
Naples, FL. Disposed of its only asset in the Naples, FL MSA with the $19.3 million sale of this off-campus, unaffiliated property to a private market purchaser.

BALANCE SHEET

Debt paydown from asset sales has decreased run-rate Net Debt to Adjusted EBITDA to 6.0x. By year-end, Net Debt to Adjusted EBITDA is anticipated to be between 5.4x - 5.7x. Through July and inclusive of asset sales, the Company has approximately $1.2 billion of liquidity.

On July 25th, the Company entered into an extension of its $1.5 billion revolving credit facility, which extended the maturity to 2030 (inclusive of two 6-month extension options). As part of this process, the Company also received additional extension options on all its outstanding term loans. With these new extension options, the Company will have no term loan maturities in 2026 and has reduced its debt maturing through the end of 2026 from $1.5 billion to $600 million.

STRATEGIC PLAN PRESENTATION

A Strategic Plan presentation is posted to the Investor Relations section of the Company's website at www.healthcarerealty.com. Clear and purposeful changes are underway at the Company to improve operational performance, optimize the portfolio, and re-establish credibility. The successful implementation of the Strategic Plan will reposition the Company for accretive long-term growth and value creation to maximize shareholder value.

LEADERSHIP UPDATE

During the second quarter, the Company commenced a platform restructuring to drive meaningful cost savings and promote incremental accountability at the asset level between the operations and leasing teams. As part of this restructuring, the Company hired two proven industry veterans to spearhead the newly created asset management platform: Tony Acevedo (SVP – Asset Management) and Glenn Preston (SVP – Asset Management). Tony and Glenn have 16 years and 25 years of Outpatient Medical operating experience, respectively. They will each report up to our COO, Rob Hull.

After a 24-year career at Healthcare Realty, Julie Wilson (EVP – Chief Administrative Officer) will be departing the organization at year-end. In addition, there are various other senior leadership positions impacted by the restructuring that will result in additional departures during 2025.

"We have some exciting changes happening at Healthcare Realty aimed at improving performance. I look forward to working closely with Tony and Glenn as we shift towards an operations-centric model," commented Peter Scott, President and CEO. "I would also like to express a heartfelt thanks to Julie and all the departing officers. They all played vital roles in the growth of the organization, and we wish them the best in their future endeavors."

DIVIDEND

The Board unanimously approved a common stock dividend in the amount of $0.24 per share to be paid on August 28, 2025, to Class A common stockholders of record on August 14, 2025. Additionally, the eligible holders of operating partnership units will receive a distribution of $0.24 per unit, equivalent to the Company's Class A common stock dividend.

The right-sized dividend is a 23% reduction from the prior level and immediately reduces the FAD payout ratio to approximately 80%. The key drivers of the right-sized dividend are: (i) mitigating refinancing risk on near-term bonds; (ii) achieving $100 million of annual incremental retained earnings to fund significant return-on-capital investments in the existing portfolio; and (iii) maximizing go-forward earnings potential.

GUIDANCE

The Company increased its Normalized FFO per share and Same Store Cash NOI growth guidance, as outlined below, as well as updated the guidance provided on page 30 of the Supplemental Information:

	EXPECTED 2025
	PRIOR						CURRENT						ACTUAL
	LOW			HIGH			LOW			HIGH			2Q 2025			YTD
Earnings per share	$	(0.28	)	$	(0.20	)	$	(0.78	)	$	(0.73	)	$	(0.45	)	$	(0.58	)
NAREIT FFO per share	$	1.44		$	1.48		$	1.42		$	1.46		$	0.34		$	0.69
Normalized FFO per share	$	1.56		$	1.60		$	1.57		$	1.61		$	0.41		$	0.80
Same Store Cash NOI growth		3.00	%		3.75	%		3.25	%		4.00	%		5.1	%		3.9	%

The 2025 annual guidance range reflects the Company's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, interest rates, and operating and general and administrative expenses. The Company's guidance does not contemplate impacts from gains or losses from dispositions, potential impairments, or debt extinguishment costs, if any. There can be no assurance that the Company's actual results will not be materially higher or lower than these expectations. If actual results vary from these assumptions, the Company's expectations may change.

FINANCIAL REPORTING

In the second quarter, the Company began utilizing the Carrying Value of its debt in the calculation of Net Debt for purposes of reporting leverage metrics. For the second quarter, the result of this change was an approximate 0.25x reduction in Net Debt to Adjusted EBITDA.

The Company has also started excluding Leasing Commissions related to first generation leases from Maintenance Capital for its calculation of FAD. Prior to this change, first generation Leasing Commissions were included in Maintenance Capital. Based on historical data, the Company would expect this to be an approximate $5-10 million annual decrease in Maintenance Capital depending on leasing activity. The Company's 2Q 2025 payout ratio would still have been below 100% without this reporting change.

These changes are intended to conform the Company's reporting with market norms.

EARNINGS CALL

On Friday, August 1, 2025, at 9:00 a.m. Eastern Time, Healthcare Realty Trust has scheduled a conference call to discuss earnings results, quarterly activities, general operations of the Company and industry trends.

Simultaneously, a webcast of the conference call will be available to interested parties at https://investors.healthcarerealty.com/corporate-profile/webcasts under the Investor Relations section. A webcast replay will be available following the call at the same address.

Live Conference Call Access Details:
- Domestic Dial-In Number: +1 800-715-9871 access code 4950066;
- All Other Locations: +1 646-307-1963 access code 4950066.
Replay Information:
- Domestic Dial-In Number: +1 800-770-2030 access code 4950066;
- All Other Locations: +1 609-800-9909 access code 4950066.

ABOUT HEALTHCARE REALTY

Healthcare Realty Trust Incorporated (NYSE:HR) is the largest, pure-play owner, operator and developer of medical outpatient buildings in the United States.

Additional information regarding the Company, including this quarter's operations, can be found at www.healthcarerealty.com. In addition to the historical information contained within, this press release contains certain forward-looking statements with respect to the Company. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "target," "intend," "plan," "estimate," "project," "continue," "should," "could," "budget" and other comparable terms. These forward-looking statements are based on the Company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Such risks and uncertainties include, among other things, the following: the Company's expected results may not be achieved; risks related to future opportunities and plans for the Company, including the uncertainty of expected future financial performance and results of the Company; pandemics or other health crises; increases in interest rates; the availability and cost of capital at expected rates; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to release space at similar rates as vacancies occur; the Company's ability to renew expiring leases; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; the Company may be required under purchase options to sell properties and may not be able to reinvest the proceeds from such sales at rates of return equal to the return received on the properties sold; uninsured or underinsured losses related to casualty or liability; the incurrence of impairment charges on its real estate properties or other assets; other legal and operational matters; and other risks and uncertainties affecting the Company, including those described from time to time under the caption "Risk Factors" and elsewhere in the Company's filings and reports with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Moreover, other risks and uncertainties of which the Company is not currently aware may also affect the Company's forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company's filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing. For a detailed discussion of the Company's risk factors, please refer to the Company's filings with the SEC, including this report and the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Consolidated Balance Sheets

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

ASSETS
	2Q 2025			1Q 2025			4Q 2024			3Q 2024			2Q 2024
Real estate properties
Land	$	1,105,231		$	1,134,635		$	1,143,468		$	1,195,116		$	1,287,532
Buildings and improvements		9,199,089			9,729,912			9,707,066			10,074,504			10,436,218
Lease intangibles		567,244			631,864			664,867			718,343			764,730
Personal property		6,944			9,938			9,909			9,246			12,501
Investment in financing receivables, net		124,134			123,813			123,671			123,045			122,413
Financing lease right-of-use assets		76,574			76,958			77,343			77,728			81,401
Construction in progress		40,421			35,101			31,978			125,944			97,732
Land held for development		49,110			52,408			52,408			52,408			59,871
Total real estate investments		11,168,747			11,794,629			11,810,710			12,376,334			12,862,398
Less accumulated depreciation and amortization		(2,494,169	)		(2,583,819	)		(2,483,656	)		(2,478,544	)		(2,427,709	)
Total real estate investments, net		8,674,578			9,210,810			9,327,054			9,897,790			10,434,689
Cash and cash equivalents ¹		25,507			25,722			68,916			22,801			137,773
Assets held for sale, net		358,207			6,635			12,897			156,218			34,530
Operating lease right-of-use assets		243,910			259,764			261,438			259,013			261,976
Investments in unconsolidated joint ventures		463,430			470,418			473,122			417,084			374,841
Other assets, net and goodwill		469,940			522,920			507,496			491,679			559,818
Total assets	$	10,235,572		$	10,496,269		$	10,650,923		$	11,244,585		$	11,803,627

LIABILITIES AND STOCKHOLDERS' EQUITY
	2Q 2025			1Q 2025			4Q 2024			3Q 2024			2Q 2024
Liabilities
Notes and bonds payable	$	4,694,391		$	4,732,618		$	4,662,771		$	4,957,796		$	5,148,153
Accounts payable and accrued liabilities		194,076			144,855			222,510			197,428			195,884
Liabilities of properties held for sale		30,278			422			1,283			7,919			1,805
Operating lease liabilities		203,678			224,117			224,499			229,925			230,601
Financing lease liabilities		73,019			72,585			72,346			71,887			75,199
Other liabilities		158,704			174,830			161,640			180,283			177,293
Total liabilities		5,354,146			5,349,427			5,345,049			5,645,238			5,828,935

Redeemable non-controlling interests		4,332			4,627			4,778			3,875			3,875

Stockholders' equity
Preferred stock, $0.01 par value; 200,000 shares authorized		—			—			—			—			—
Common stock, $0.01 par value; 1,000,000 shares authorized		3,516			3,510			3,505			3,558			3,643
Additional paid-in capital		9,129,338			9,121,269			9,118,229			9,198,004			9,340,028
Accumulated other comprehensive (loss) income		(9,185	)		(7,206	)		(1,168	)		(16,963	)		6,986
Cumulative net income attributable to common stockholders		171,585			329,436			374,309			481,155			574,178
Cumulative dividends		(4,477,940	)		(4,368,739	)		(4,260,014	)		(4,150,328	)		(4,037,693	)
Total stockholders' equity		4,817,314			5,078,270			5,234,861			5,515,426			5,887,142
Non-controlling interest		59,780			63,945			66,235			80,046			83,675
Total equity		4,877,094			5,142,215			5,301,096			5,595,472			5,970,817
Total liabilities and stockholders' equity	$	10,235,572		$	10,496,269		$	10,650,923		$	11,244,585		$	11,803,627

2Q 2024 cash and cash equivalents include $96.0 million of proceeds held in a cash escrow account from a portfolio disposition that closed on June 28, 2024, and was received by the Company on July 1, 2024.

Consolidated Statements of Income

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA


	2Q 2025			1Q 2025			4Q 2024			3Q 2024			2Q 2024
Revenues
Rental income ¹	$	287,070		$	288,857		$	300,065		$	306,499		$	308,135
Interest income		3,449			3,731			4,076			3,904			3,865
Other operating		6,983			6,389			5,625			5,020			4,322
		297,502			298,977			309,766			315,423			316,322
Expenses
Property operating		109,924			114,963			114,415			120,232			117,719
General and administrative		23,482			13,530			34,208			20,124			14,002
Normalizing items ²		(10,302	)		(502	)		(22,991	)		(6,861	)		—
Normalized general and administrative		13,180			13,028			11,217			13,263			14,002
Transaction costs		593			1,011			1,577			719			431
Depreciation and amortization		147,749			150,969			160,330			163,226			173,477
		281,748			280,473			310,530			304,301			305,629
Other income (expense)
Interest expense before merger-related fair value		(42,766	)		(44,366	)		(47,951	)		(50,465	)		(52,393	)
Merger-related fair value adjustment		(10,580	)		(10,446	)		(10,314	)		(10,184	)		(10,064	)
Interest expense		(53,346	)		(54,812	)		(58,265	)		(60,649	)		(62,457	)
Gain on sales of real estate properties and other assets		20,004			2,904			32,082			39,310			38,338
Loss on extinguishment of debt		—			—			(237	)		—			—
Impairment of real estate assets and credit loss reserves		(142,348	)		(12,081	)		(81,098	)		(84,394	)		(132,118	)
Equity income (loss) from unconsolidated joint ventures		158			1			224			208			(146	)
Interest and other income (expense), net		(366	)		95			(154	)		(132	)		(248	)
		(175,898	)		(63,893	)		(107,448	)		(105,657	)		(156,631	)
Net loss	$	(160,144	)	$	(45,389	)	$	(108,212	)	$	(94,535	)	$	(145,938	)
Net loss attributable to non-controlling interests		2,293			516			1,366			1,512			2,158
Net loss attributable to common stockholders	$	(157,851	)	$	(44,873	)	$	(106,846	)	$	(93,023	)	$	(143,780	)


Basic earnings per common share	$	(0.45	)	$	(0.13	)	$	(0.31	)	$	(0.26	)	$	(0.39	)
Diluted earnings per common share	$	(0.45	)	$	(0.13	)	$	(0.31	)	$	(0.26	)	$	(0.39	)

Weighted average common shares outstanding - basic		349,628			349,539			351,560			358,960			372,477
Weighted average common shares outstanding - diluted ³		349,628			349,539			351,560			358,960			372,477

In 4Q 2024, rental income was reduced by $0.7 million for Prospect Medical revenue reserves. In 2Q 2024, rental income was reduced by $3.0 million for Steward Health revenue reserves.
Normalizing items primarily include restructuring, severance-related costs and non-routine advisory fees associated with shareholder engagement.
Potential common shares are not included in the computation of diluted earnings per share when a loss exists, as the effect would be an antidilutive per share amount. As a result, the outstanding limited partnership units in the Company's operating partnership ("OP"), totaling 4,161,628 units were not included.

Reconciliation of FFO, Normalized FFO and FAD ^1,2,3

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA


	2Q 2025			1Q 2025			4Q 2024			3Q 2024			2Q 2024
Net loss attributable to common stockholders	$	(157,851	)	$	(44,873	)	$	(106,846	)	$	(93,023	)	$	(143,780	)
Net loss attributable to common stockholders/diluted share ³	$	(0.45	)	$	(0.13	)	$	(0.31	)	$	(0.26	)	$	(0.39	)

Gain on sales of real estate assets		(20,004	)		(2,904	)		(32,082	)		(39,148	)		(33,431	)
Impairments of real estate assets		140,877			10,145			75,423			37,632			120,917
Real estate depreciation and amortization		152,936			155,288			164,656			167,821			177,350
Non-controlling loss from operating partnership units		(2,293	)		(599	)		(1,422	)		(1,372	)		(2,077	)
Unconsolidated JV depreciation and amortization		6,706			6,717			5,913			5,378			4,818
FFO adjustments	$	278,222		$	168,647		$	212,488		$	170,311		$	267,577
FFO adjustments per common share - diluted	$	0.79		$	0.48		$	0.60		$	0.47		$	0.71
FFO	$	120,371		$	123,774		$	105,642		$	77,288		$	123,797
FFO per common share - diluted	$	0.34		$	0.35		$	0.30		$	0.21		$	0.33

Transaction costs		593			1,011			1,577			719			431
Lease intangible amortization		(222	)		(228	)		(2,348	)		(10	)		129
Non-routine legal costs/forfeited earnest money received		478			77			306			306			465
Debt financing costs		—			—			237			—			—
Restructuring and severance-related charges		10,302			502			22,991			6,861			—
Credit losses and gains (losses) on other assets, net ⁴		1,471			1,936			4,582			46,600			8,525
Merger-related fair value adjustment		10,580			10,446			10,314			10,184			10,064
Unconsolidated JV normalizing items⁵		163			204			113			101			89
Normalized FFO adjustments	$	23,365		$	13,948		$	37,772		$	64,761		$	19,703
Normalized FFO adjustments per common share - diluted	$	0.07		$	0.04		$	0.11		$	0.18		$	0.05
Normalized FFO	$	143,736		$	137,722		$	143,414		$	142,049		$	143,500
Normalized FFO per common share - diluted	$	0.41		$	0.39		$	0.40		$	0.39		$	0.38

Non-real estate depreciation and amortization		207			222			404			276			313
Non-cash interest amortization, net ⁶		1,130			1,217			1,239			1,319			1,267
Rent reserves, net ⁷		130			94			(369	)		(27	)		1,261
Straight-line rent income, net		(7,045	)		(6,844	)		(7,051	)		(5,771	)		(6,799	)
Stock-based compensation		3,887			3,028			3,028			4,064			3,383
Unconsolidated JV non-cash items ⁸		(356	)		(253	)		(277	)		(376	)		(148	)
Normalized FFO adjusted for non-cash items	$	141,689		$	135,186		$	140,388		$	141,534		$	142,777
2nd generation TI		(12,036	)		(14,885	)		(20,003	)		(16,951	)		(12,287	)
Leasing commissions paid		(5,187	)		(11,394	)		(11,957	)		(10,266	)		(10,012	)
Building capital		(9,112	)		(6,687	)		(8,347	)		(7,389	)		(12,835	)
Total maintenance capex	$	(26,335	)	$	(32,966	)	$	(40,307	)	$	(34,606	)	$	(35,134	)
FAD	$	115,354		$	102,220		$	100,081		$	106,928		$	107,643
Quarterly dividends and OP distributions	$	110,486		$	109,840		$	110,808		$	113,770		$	118,627
FFO wtd avg common shares outstanding - diluted⁹		354,078			353,522			355,874			363,370			376,556

Funds from operations ("FFO") and FFO per share are operating performance measures adopted by NAREIT. NAREIT defines FFO as "net income (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity."
FFO, Normalized FFO and Funds Available for Distribution ("FAD") do not represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. FFO, Normalized FFO and FAD should not be considered alternatives to net income attributable to common stockholders as indicators of the Company's operating performance or as alternatives to cash flow as measures of liquidity.
Potential common shares are not included in the computation of diluted earnings per share when a loss exists, as the effect would be an antidilutive per share amount.
2Q2025 represents $1.5 million of credit loss reserves. 1Q 2025 represents a $1.9 million loss on other assets. 4Q 2024 includes $1.6 million of credit loss reserves, net of recoveries and a $4.1 million loss on other assets. These amounts were partially offset by a $1.1 million recovery of prior-period Steward Health straight-line rent for leases assumed. 3Q 2024 includes $46.8 million of credit loss reserves and $0.2 million gain on other assets. 2Q 2024 includes $11.2 million of credit loss reserves and $2.2 million write-off of prior period Steward Health straight-line rent, offset by $4.9 million gain on other assets.
Includes the Company's proportionate share of normalizing items related to unconsolidated joint ventures such as lease intangibles and acquisition and pursuit costs.
Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
2Q 2024 includes $0.8 million related to the Steward Health revenue reserve for March.
Includes the Company's proportionate share of straight-line rent, net and rent reserves, net related to unconsolidated joint ventures.
The Company utilizes the treasury stock method, which includes the dilutive effect of nonvested share-based awards outstanding of 287,797 for the three months ended June 30, 2025. Also includes the diluted impact of 4,161,628 OP units outstanding.

Reconciliation of Non-GAAP Measures

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED

Management considers funds from operations ("FFO"), FFO per share, normalized FFO, normalized FFO per share, and funds available for distribution ("FAD") to be useful non-GAAP measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure historical financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors.

The non-GAAP financial measures presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income (determined in accordance with GAAP), as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs.

FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). NAREIT defines FFO as "net income (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity." The Company defines Normalized FFO as FFO excluding acquisition-related expenses, lease intangible amortization and other normalizing items that are unusual and infrequent in nature. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense and rent reserves, net; and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO and FAD do not represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. FFO, Normalized FFO and FAD should not be considered an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. FFO, Normalized FFO and FAD should be reviewed in connection with GAAP financial measures.

Management believes FFO, FFO per share, Normalized FFO, Normalized FFO per share, and FAD provide an understanding of the operating performance of the Company's properties without giving effect to certain significant non-cash items, including depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, gains or losses from sales of real estate, and other normalizing items that are unusual and infrequent, FFO, FFO per share, Normalized FFO, Normalized FFO per share and FAD can facilitate comparisons of operating performance between periods. The Company reports these measures because they have been observed by management to be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because these measures are consistently reported, discussed, and compared by research analysts in their notes and publications about REITs.

Cash NOI and Same Store Cash NOI are key performance indicators. Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results. The Company defines Cash NOI as rental income plus interest from financing receivables less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, lease termination fees, financing receivable amortization, tenant improvement amortization and leasing commission amortization. Cash NOI is historical and not necessarily indicative of future results.

Same Store Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale, properties undergoing redevelopment, and newly redeveloped or developed properties.

The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction through the application of additional resources, including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.

Any recently acquired property will be included in the same store pool once the Company has owned the property for five full quarters. Newly developed or redeveloped properties will be included in the same store pool five full quarters after substantial completion.

Ron Hubbard

Vice President, Investor Relations

P: 615.269.8290

Healthcare Realty Reports Second Quarter 2025 Results