Healthcare Realty Trust (NYSE:HR) executives told investors the company ended 2025 “ahead of schedule” on a three-year strategic plan that management says is reshaping its outpatient medical real estate platform. On the company’s fourth-quarter 2025 earnings call, President and CEO Pete Scott said the year was “transformational” and highlighted progress across operations, expenses, portfolio repositioning, and balance sheet repair.
Strategic plan progress: platform reset, cost savings, and portfolio reshaping
Scott said Healthcare Realty has completed several major initiatives laid out in its July strategic plan. He reported that the revamp of the asset management platform is complete, with a new leadership team and a leasing model intended to improve return on investment across the portfolio. Scott said that under the new approach, cash leasing spreads improved 60 basis points and tenant retention improved 220 basis points, alongside “a meaningful uptick” in lease IRRs and lease payback periods.
Healthcare Realty also completed an asset disposition program, selling $1.2 billion of assets at a blended 6.7% cap rate. Scott said the company exited 14 non-core markets and improved its footprint into higher-growth MSAs. He pointed to nearly 5% same-store NOI growth in 2025 as confirmation of the portfolio’s positioning.
On capital structure, Scott said balance sheet initiatives are complete, with “much needed financial flexibility” and modest capacity for capital allocation. He said net debt to EBITDA declined to 5.4x, maturities were extended, liquidity increased, and Moody’s and S&P shifted their outlook to stable. Scott also reiterated that the company “rightsize[d]” its dividend, describing it as appropriate and well-covered, and said the dividend currently offers “a nearly 6% current yield.”
2025 results: FFO outperformance and strong same-store NOI
Scott said 2025 results surpassed expectations “across the board.” Normalized FFO was $1.61 per share, which he said exceeded the midpoint of original guidance by $0.03. Same-store NOI growth was 4.8%, exceeding the midpoint of original guidance by 140 basis points. The company executed approximately 5.8 million square feet of leases during the year and entered 2026 with what Scott described as health system dialogue at an “all-time high.”
CFO Dan Gabbay, who joined recently and participated in his first call in the role, provided additional quarterly detail. He reported fourth-quarter normalized FFO of $0.40 per share and same-store cash NOI growth of 5.5%. Fourth-quarter FAD was $0.32 per share, implying a 75% quarterly dividend payout ratio. Gabbay attributed the quarter’s outperformance to 103 basis points of year-over-year same-store occupancy gains, 3.7% cash leasing spreads, and ongoing property-level and G&A expense controls.
For the full year, Gabbay reported normalized FFO of $1.61 per share, FAD of $1.26 per share, and same-store cash NOI growth of 4.8%.
Leasing and operations: retention, occupancy gains, and redevelopment momentum
COO Rob Hull said the company finished the year with “robust” leasing and early signs of operating improvement tied to the revamped asset management platform. For 2025, Healthcare Realty executed 5.8 million square feet of leasing, including 1.6 million square feet of new leases. Hull said annual escalators across all leasing activity averaged 3.1%, lifting the portfolio average to 2.9%, and weighted average lease term was nearly six years.
Tenant retention was 82% for the year, and same-store absorption of nearly 290,000 square feet drove more than 100 basis points of occupancy gain. In the fourth quarter, the company executed 1.5 million square feet of leasing, retention was nearly 83% (the eighth consecutive quarter over 80%), and same-store occupancy improved over 20 basis points.
Hull also pointed to redevelopment leasing progress, including a 1,000-basis-point increase in lease percentage since the end of the third quarter at redevelopment properties. He cited a 64,000-square-foot lease with St. Peter’s Health at a redevelopment project in upstate New York as an example of demand.
Management described industry fundamentals as supportive, with demand in the top 100 MSAs outstripping supply and completions as a percentage of inventory near all-time lows. Hull said the company has a 1.3 million square foot leasing pipeline and emphasized deepening relationships with health system partners, citing recent activity with Hartford Healthcare and Baptist in Memphis, as well as early renewals and extensions with Tufts Medicine, Advocate Health, and the Medical University of South Carolina.
Capital allocation: redevelopments, buybacks, and joint ventures
Scott said capital allocation will remain “incredibly disciplined,” acknowledging that the company’s cost of capital and discount to intrinsic asset value limit external growth. He outlined three priorities:
- Redevelopments: The company is prioritizing redevelopment projects within the existing portfolio and said it is seeing yields on cost of approximately 10%.
- Stock repurchases: Scott said the company repurchased $50 million of stock in January and has authorization to purchase more. He noted the shares were trading at an FFO yield of more than 9% at the time of his comments.
- Joint ventures: Management said it will consider JV transactions only when it can generate earnings accretion through investment returns and fee arrangements, emphasizing discipline on deal yields relative to the company’s implied cap rate.
Gabbay added that in January the company repurchased 2.9 million shares for $50 million and has $450 million remaining under its current authorization. Both Scott and Gabbay emphasized that, other than redevelopments, guidance does not assume acquisitions, developments, or incremental buybacks.
2026 outlook: flat FFO midpoint with core growth offset by dilution
For 2026, management guided normalized FFO per share to a range of $1.58 to $1.64, with a midpoint of $1.61. Scott acknowledged the midpoint implies flat year-over-year growth, but said embedded within guidance is approximately 5% core earnings growth, offset by dilution from 2025 dispositions and deleveraging that were “back-end-weighted.”
Same-store cash NOI growth is expected to be 3.5% to 4.5%. In Q&A, Scott said escalators are typically the largest driver of same-store growth—around 75% or more—and noted the company is averaging 3% or greater escalators on lease deals being signed. He also said the company expects retention in the 80% to 85% range and expects positive absorption, though he cautioned it may not match the more than 100-basis-point absorption experienced in 2025 given the portfolio is now around 92% occupied.
Gabbay said 2026 G&A is expected to be $43 million to $47 million. He also discussed refinancing assumptions, noting the company expects the $600 million bonds due in August to be refinanced mid-year with new bonds in the “low 5%” coupon area compared with the existing 3.5% coupon. He also highlighted a new $600 million commercial paper program intended to diversify capital sources and reduce interest costs versus the line of credit. Management expects leverage in the mid-5x net debt to EBITDA range for the full year.
On dispositions, Scott said guidance includes $175 million of sales, including approximately $70 million of deals carried over from the prior disposition plan, plus a $45 million loan repayment expected in late March. After those items, he said about $60 million of dispositions are baked into guidance, and noted the company may consider selling certain non-core, non-income producing assets such as land, while adding that “nothing is off the table” if it maximizes shareholder value.
About Healthcare Realty Trust (NYSE:HR)
Healthcare Realty Trust (NYSE: HR) is a real estate investment trust specializing in the ownership, acquisition and management of outpatient medical facilities. Headquartered in Nashville, Tennessee, the company’s portfolio is focused primarily on medical office buildings and outpatient healthcare properties that serve hospitals, health systems and other healthcare providers. Its business model centers on securing long-term, triple-net leases to generate stable income streams from a diversified tenant base.
The company’s properties are located across key metropolitan markets in the United States, including major healthcare hubs in the Southeast, Southwest and in select coastal regions.
