Information as of December 31, 2012, unless otherwise disclosed.

Transcription

1 February 2013

2 In addition to the historical information contained within, the matters discussed in this presentation contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. These risks are discussed in filings with the Securities and Exchange Commission by Healthcare Realty Trust, including its Annual Report on Form 10-K for the year ended December 31, 2012 under the heading Risk Factors, and as may be updated in its Quarterly Reports on Form 10-Q filed thereafter. Forward-looking statements represent the Company s judgment as of the date of this presentation. The Company disclaims any obligation to update forward-looking material. Information as of December 31, 2012, unless otherwise disclosed.

3 The Big Picture HEALTHCARE REALTY $3.0 billion invested in 207 properties and mortgages 13.6 million square feet in 28 states 10.1 million square feet managed internally 82% medical office and outpatient 78% on or adjacent to hospital campuses TOP LOCATIONS SQ FT % Dallas/Fort Worth 2,314, % Nashville 812, % Charlotte 787, % San Antonio 689, % Houston 649, % Indianapolis 558, % Richmond, Virginia 558, % Los Angeles 551, % Denver/Colorado Springs 540, % Roanoke, Virginia 466, % 3

4 Portfolio History $3, Acquired Baylor Healthcare Portfolio 2007 Sold Senior Living Facilities and paid special dividend of $4.75 per share 2008 Acquired Carolinas Healthcare System Portfolio 2011 Acquired Bon Secours Portfolio 1998 Acquired Capstone Capital Corporation ASSETS (in millions) 2, Acquired Starr Sanders Johnson 1, MEDICAL OFFICE BUILDING SPECIALITY INPATIENT SENIOR HOUSING OTHER 4

5 Industry Landscape MORE THAN $1 TRILLION OF HEALTHCARE REAL ESTATE VALUE ACUTE CARE ACUITY Hospitals $304B IRF $15B LTAC $18B RESIDENTIAL CARE OUTPATIENT CARE MOB/Outpatient $169B Skilled Nursing $104B RECOVERY & REHABILITATION Senior Housing $163B Hospital-Based Outpatient $42B Small Physician Clinics $203B SETTING Source: Sg2 and Stifel Nicolaus 5

6 Who Owns MOBs? 100% 87% 82% 75% % OF MOBs IN PORTFOLIO 50% 16% 18% 20% 31% 25% 14% 15% 0% 1% 1% HCP VTR HCN DRE SNH OHI HR HTA WRE MPW NHI LTC SBRA * Includes only public REITs Source: Company Filings, Wells Fargo Securities, LLC 6

7 Size of MOB Market TOTAL OUTPATIENT/ MOB MARKET AVERAGE ANNUAL SALES NEW DEVELOPMENT EACH YEAR $262B* $3.7B $5B REITs $15B Investor-owned $52B Non- REITs $37B Hospital-owned $210B Development projects, more so than acquisitions, foster hospital relationships. Hospital-owned facilities are rarely for sale. * Total outpatient/mob market excludes government and most small physician clinics Source: Stifel Nicolaus; Real Capital Analytics; Modern Healthcare 7

8 Booming Demand The aging population and increased utilization are expected to drive higher volumes of outpatient visits. ANNUAL PHYSICIAN OFFICE VISITS BY AGE < Visits 13.8% HC Exp. % of GDP 19.8% 19.3% % over 65yr. old Visits 12.4% > Visits Healthcare employment continues to increase to meet growing demand. PATIENT VISITS BY YEAR (IN MILLIONS) EMPLOYMENT CHANGE SINCE Outpatient Visits 30% 20% + 29% Outpatient Care Centers + 16% Ambulatory (all outpatient facilities) 300 Inpatient Days 10% 0% % Healthcare Jobs + 9% Office of Physicians % - 2% Total US Employment Source: CMS.gov, US Centers for Disease Control and Prevention, US Census Bureau, AHA Hospital Statistics, BLS.gov 8

9 Healthcare Reform DEGREE OF PROVIDER INTEGRATION DESIRED BENEFITS Lower Costs PAYMENT MODELS Fee-for-Service Reimbursement Cuts Pay for Performance Bundled Payments Shared Savings Capitation Improve Quality Expand Base Increase Volume Market Share REFORM PRESSURES Lower Reimbursement Less Leverage with Payors Greater Capital Needs More Administrative Burden Healthcare Realty is uniquely positioned to partner with capital constrained providers as they accelerate their implementation of new payment models in an effort to lower cost and improve quality. 9

10 Provider Alignment Physicians and hospitals are increasingly moving forward with alignment models. ACO 100% PRACT ICES OWNED BY PHYSICIANS 50% 0% PRACTICES OWNED BY HOSPITALS COMPLEXITY & DURABILITY IPA Individual Employment Contracts Joint Venture Volunteer Medical Staff Bundled Payments Institute Co-Management Foundation Recruitment Support/Income Guarantee DEGREE OF ALIGNMENT Clinical Integration Source: Dixon Hughes Goodman 10

11 Rent Cushion MOB rent cushion provides a buffer against reimbursement changes. > 9 X > 6 X 3.4X 3 X COVERAGE RATIO 1.2X 1.5X RENT CUSHION * RENT ( 1x) Assisted Living/ Independent Living Skilled Nursing Facility Inpatient Rehab Facility Acute Care Hospital Surgical Hospital Medical Office Building * Rent Cushion (8x) = Coverage ratio (9X) - rent (1X) Source: Stifel Nicolaus; Company Filings; MGMA 11

12 Tenant Diversity HEALTHCARE REALTY S AVERAGE TENANT SIZE = 4,325 SF 0-2,500 SF 2,501-5,000 SF 5,001-7,500 SF 7,501-10,000 SF 10,000+ SF Healthcare Realty Tenant Specialties Allergy Anesthesiology Audiology Bariatric Surgery Cardio/Thoracic Surgery Cardiology Dermatology Endocrinology Family Practice Gastroenterology General Surgery Head and Neck Surgery Hematology/ Oncology Infectious Disease Internal Medicine Neonatology Nephrology Neurology Obstetrics/Gynecology Ophthalmology Orthopedics Otolaryngology Pain Management Pediatrics Physical Therapy Plastic Surgery Podiatry Psychology/Psychiatry Pulmonary Medicine Radiology Rheumatology Sports Medicine Vascular Surgery Urology Healthcare Realty achieves diversity through tenant size and medical specialties. 12

13 Topography Proximity to hospital drives long-term value and lowers risk. ACCESS & CONVENIENCE LOWER RISK HOSPITAL O N - C A M P U S N E A R - C A M P U S LIMITED SUPPLY LOWER FUNGIBILITY HR S % ON/ADJ TO CAMPUS BY SQUARE FEET Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q O F F - C A M P U S LOW-FUNGIBILITY: Having a unique quality which cannot be replaced exactly. Healthcare Realty has strategically shifted its portfolio toward lower-risk, on-campus medical office buildings. 13

14 Intrinsic Real Estate Value vs. Leasehold Value Intrinsic Real Estate Value Demand-driven Low fungibility Perpetual cash flow Duration: infinite Multi-tenant building in dense location with strong demand. DEMAND > SUPPLY SUPPLY > DEMAND Credit worthy single tenant in location with few replacement tenants. Leasehold Value Credit-driven High fungibility Rent exceeds market Renewal roll down (terminal value risk) Duration: lease term (finite) 14

15 MOB Portfolio Differentiation Over 75% of Healthcare Realty s assets score in the top two quadrants. LOWEST RISK % 6-7% Healthcare Demand/Need PHYSICIAN OFFICE VISITS INPATIENT PROCEDURES Beyond market dynamics, asset and portfolio value is a function of asset-specific attributes, including: HR PORTFOLIO PHYSICIAN NEED HIGHEST RISK 8% + INCOME INSURED POPULATION / PAYOR MIX POPULATION GROWTH Patient Affluence 7-8% On/off campus Hospital strength Tenant mix Building size Ground lease vs. fee simple Building condition/functionality Competition Parking Financial measures: Growth profile Lease rates Capital needs Operating expenses Lease turnover/expirations HR DEVELOPMENTS % HR S ESTIMATED CAP RATE RANGE Source: Montecito Research & Analytics 15

16 Historical Investment Activity Total Assets with New Investments Acquisitions & Development $2.1B $111M $316M $1,637M $96M $81M $2,081M $2.3B $2.6B $84M $305M $2,220M $2.9B $141M $190M $2,541M $3.0B $84M $95M $2,800M TOTAL ASSETS $3.0 B $ 1 33% 50% 17%. 5 B: CUMULATIVE NEW INVESTMENTS CUMULATIVE INVESTMENTS DEVELOPMENT $516M ACQUISITION $987M ANNUAL AVERAGE OF NEW INVESTMENTS: $301 M DEVELOPMENT ACQUISITION Since 2007, Healthcare Realty has doubled its asset base, reducing risk and increasing long-term value. 16

17 Prospective Investments MERCY HEALTH PROJECTS Investment Activity Momentum continues to build with development leasing at 60% and improved acquisition opportunities. Funding two 100% leased projects ( loan to own ) with AA- rated Mercy Health totaling $203M INVESTMENT FUNDING (in millions) $ $301M annual average, ACQUISITION Targeting on-campus, multi-tenant MOBs associated with market leading hospitals Expect 2013 acquistion levels of $100M-$200M PROJECTION DEVELOPMENT Continued leasing momentum requiring TI funding ($35M-$45M to stabilize SIP) Seeing steady demand for new space as a result of provider consolidation and less uncertainty around reform 17

18 Mercy Health Projects The Company is funding two build-to-suit facilities for Mercy Health, a AA- rated health system in Saint Louis that operates 26 acute care hospitals and two heart hospitals in seven states. Mortgages generate interest income at 6.75%, and properties will yield 8% upon completion Upon completion, the Company will assume ownership of the facilities for the outstanding loan balances Mercy will fully lease these facilities for an initial lease term of 14 years COMPREHENSIVE OUTPATIENT FACILITY ORTHOPEDIC SURGICAL FACILITY Oklahoma City, OK Springfield, MO SIZE 200,000 SQ FT SIZE 186,000 SQ FT AMOUNT FUNDED AS OF DECEMBER 31, 2012 $56.8M AMOUNT FUNDED AS OF DECEMBER 31, 2012 $61.6M REMAINING AMOUNT TO BE FUNDED $34.3M REMAINING AMOUNT TO BE FUNDED $49.8M EXPECTED COMPLETION DATE July 2013 EXPECTED COMPLETION DATE November

19 Portfolio Management $2.9 BILLION OF ASSETS * ACQUISITIONS M E R C Y H E A L TH LEASE-UP MTGs CIP SIP STABILIZED PROPERTIES NON-CORE ASSETS DISPOSITION 5% 0% 14% 77% 4% * Excludes land held for development totaling $25.2M, one unconsolidated joint venture totaling $1.3M and corporate property totaling $15.0M 19

20 Development The steady pace of leasing throughout 2012 is expected to continue in LEASE-UP MTGs CIP 0% SIP 14% STABILIZED PROPERTIES NON-CORE ASSETS DISPOSITION 60% Leased 41% Occupied $25M-30M of estimated NOI at stabilization $1M quarterly NOI run-rate as of Q $406M invested $35M-$45M in TI to stabilize 12 properties 1.3M square feet 20

21 Non-Core Assets Through routine asset management, Healthcare Realty recycles capital into new assets. The Company projects $40M-$60M in dispositions in LEASE-UP MTGs CIP SIP STABILIZED PROPERTIES NON-CORE ASSETS 4% DISPOSITION 2012 DISPOSITIONS $91.5M sale price 19 buildings (12 from non-core bucket) 758k square feet 57% occupied 73% off campus 48% Occupied $109.9M net book value $3.8M annual NOI 20 buildings (1 asset held for sale) 1.0M square feet 52% off campus Largest concentrations: Dallas, Houston, New Orleans, Los Angeles, St. Louis 21

22 Core Portfolio LEASE-UP MTGs CIP SIP STABILIZED PROPERTIES 77% OF ASSETS NON-CORE ASSETS DISPOSITION 91% Occupied > 8% yield on cost $190M NOI* 2-4% NOI Growth $2.2B assets 171 buildings 11.4M square feet 18% single-tenant net lease 82% multi-tenant * Annualized adjusted Q NOI 22

23 Portfolio Trends DEVELOPMENT LEASE UP 60% SAME STORE OCCUPANCY Leased 41% 100% 88% STNL * Multi-Tenant 100% 88% 28% 16% Occupied Q Q4 Q1 Q Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q CONTRACTUAL RENT INCREASES YEAR-OVER-YEAR SAME STORE NOI GROWTH 3.8% 3.1% Multi-Tenant 3.1% 4.2% STNL * 1.7% 2.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q * Single-tenant net lease 23

24 Releasing Yield Releasing yield captures the overall economics of leases renewed, whereas releasing spreads only reflect one factor. Cash Releasing Spread 2012 Average $24.20 $24.50 Releasing Yield 2012 Average* 10.16% 10.38% OLD RENT TERM NEW RENT TENANT IMPROVEMENTS GROSS INVESTMENT RENT CONCESSIONS RENT BUMP LEASING COMMISSIONS * Not indicative of overall yield because it does not reflect any vacancy 24

25 Debt-to-EBITDA Assuming debt-to-ebitda is held constant, riskier assets would perversely support higher debt levels. DEBT LEVEL * DEBT LEVEL * DEBT EBITDA Cap Rate DEBT EBITDA Cap Rate MOB SH IRF SNF HOSP. MOB SH IRF SNF HOSP. RISK RISK Assuming equal debt levels, safer lower-yielding assets will result in higher debt-to-ebitda. * Debt level is debt as a percentage of total capital 25

26 Capital Stack and Maturities $110M 1.72% Revolver 450 $265M 5.19% 400 Senior Notes Due $299M 6.62% TOTAL CAPITALIZATION 300 Senior Notes Due 2017 $397M 5.86% $3,610 MILLION $ (millions) Senior Notes Due $222M 6.22% 100 Mortgage Notes Payable 50 $2,317M * Equity Market Value SENIOR NOTES MORTGAGE NOTES PAYABLE AS OF DECEMBER 31, 2012 UNSECURED CREDIT FACILITY * Based on closing price of $26.08 on February 19,

27 Healthcare Realty Healthcare Realty Trust is a real estate investment trust that integrates owning, managing, financing and developing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. The Company had investments of approximately $3.0 billion in 207 real estate properties and mortgages as of December 31, The Company s 202 owned real estate properties are located in 28 states and total approximately 13.6 million square feet. The Company provided property management services to approximately 10.1 million square feet nationwide. 27