Company photo: Healthcare Realty, ValleyMed (cropped)
Healthcare Realty Trust raised its full-year earnings and property-income forecasts Thursday after medical-office rents and leasing helped lift same-store cash net operating income 5.1% in the third quarter.
The Nashville-based landlord now expects normalized funds from operations of $1.65 to $1.67 a share for 2026, up from its July forecast of $1.62 to $1.66. It also lifted its same-store cash NOI growth outlook to 5.00% to 5.25%, from 4.25% to 5.00%, according to its third-quarter results released October 29.
The results offer a view of the medical outpatient building market through an owner that leases space to major health systems. During the quarter, Healthcare Realty signed 329 new and renewal leases covering 1.5 million square feet, including 430,000 square feet of new leases. Tenant retention was 88%, and cash leasing spreads averaged 8.6%.
Higher property income, but a GAAP loss
Normalized FFO was $145.9 million, or 42 cents a diluted share, compared with $145.3 million, or 41 cents, a year earlier. NAREIT FFO was 38 cents a share, up from 34 cents.
Those real estate earnings measures are distinct from net income. Healthcare Realty reported a GAAP net loss of $15.8 million, or 5 cents a share, compared with a loss of $57.7 million, or 17 cents, in the third quarter of 2025. Its full-year GAAP earnings forecast remained a loss of 11 cents to 15 cents a share.
The new leases and renewals had a weighted average term of 5.9 years and average annual rent increases of 3.1%. Among the larger agreements, Ascension Health signed for 203,000 square feet across five on-campus properties in Nashville. Cedars Sinai Medical Center renewed 59,000 square feet in Los Angeles, while Mount Carmel Health System renewed the same amount across four properties in Columbus, Ohio.
Buying through KKR, selling selected assets
Since the previous quarter, Healthcare Realty’s strategic joint venture with KKR acquired $211 million of assets. Healthcare Realty’s share was approximately $42 million, rather than the full purchase total.
The purchases included two health-system-anchored medical outpatient buildings in Charleston, South Carolina, for $56 million, of which Healthcare Realty’s investment was $11 million. A 33,000-square-foot building in Seattle cost $17 million, with approximately $3 million attributable to Healthcare Realty.
The company also sold $68 million of assets since the previous quarter, taking year-to-date property dispositions to $136 million. A $36 million sale in Atlanta transferred a 59,000-square-foot medical outpatient building to its affiliated hospital.
In Chicago, Healthcare Realty sold two properties for $23 million and contracted to sell its remaining property in the metropolitan area. Completing that sale would end its presence in the Chicago market, the company said.
Buybacks and a renewed authorization
Healthcare Realty repurchased 4.2 million common shares during the third quarter and early October for $75 million, at an average price of $17.74. On October 26, it renewed a share repurchase authorization of up to $500 million for the next 12 months, replacing the expiring program. That authorization is a limit for possible purchases, not an announcement that the full amount has been spent.
The company reported approximately $1.6 billion in liquidity at September 30 and net debt equal to 5.5 times adjusted EBITDA. Its board approved a quarterly common dividend of 24 cents a share, payable November 20 to shareholders of record November 10.
The raised forecasts remain estimates. Healthcare Realty said its outlook depends on assumptions including rental rates, occupancy, interest rates and expenses, and actual results could differ materially.
JBizNews Desk | Nashville
© JBizNews.com. All rights reserved. Unauthorized reproduction or redistribution is strictly prohibited.
