Healthcare Realty Raises FFO Guidance as Same-Store Growth Slows
Healthcare Realty Trust lifted its 2026 normalized FFO guidance to a $1.64-a-share midpoint even as quarterly same-store cash NOI growth decelerated to 5.1% from 6.9% in the prior quarter.
Healthcare Realty Trust (HR), the medical-office-building landlord, raised its full-year 2026 normalized funds-from-operations guidance to a range of $1.62 to $1.66 a share, up two cents at the midpoint from the $1.59-to-$1.65 range it set in April. The company also lifted its same-store cash net operating income growth guidance for the year to 4.25% to 5.00%, a range that has now been raised twice since initial guidance.
The upgrades came even as the underlying quarterly trend moved the other way. Same-store cash NOI growth slowed to 5.1% in the second quarter from 6.9% in the first quarter and 5.5% in the fourth quarter of 2025. Tenant retention fell to 88.5% from 93.5% in the prior quarter, though it remained above the 82.7% posted in the fourth quarter. Lease execution volume also pulled back to 1.5 million square feet from 2.0 million in the first quarter, matching the pace set in the fourth quarter. Cash leasing spreads moved in the opposite direction, climbing to 4.8% from 4.2% in the first quarter and 3.7% in the fourth quarter, a sign that renewals are commanding higher rents even as fewer leases got signed.
Normalized FFO per share held at $0.41 in the second quarter, unchanged from both the first quarter and the year-earlier period. NAREIT FFO per share rose to $0.36 from $0.34 a year earlier and edged up from $0.35 in the first quarter. GAAP results moved the other direction: the company reported a net loss of $0.13 a share in the second quarter, widening from a loss of essentially zero in the first quarter, though narrower than the $0.45-a-share loss posted a year earlier. For the full year, Healthcare Realty lowered its EPS guidance to a loss of $0.11 to $0.15 a share from a prior range of a $0.05 loss to a $0.05 profit, reflecting a wider anticipated GAAP loss even as the FFO metrics improved.
The company reshaped its balance sheet during the quarter. It issued $700 million of 3.00% exchangeable senior notes due 2032 to repay $600 million of senior notes maturing in 2026, pairing the offering with a $75 million buyback of 3.8 million shares and $29 million of capped call transactions designed to limit dilution from the exchangeable notes. That replaced the $100 million open-market buyback of 5.7 million shares the company had run in the first quarter. Healthcare Realty also finalized a $400 million unsecured delayed-draw term loan with no borrowings outstanding, converting the bank commitments it had disclosed in April into a closed facility. Liquidity rose to roughly $1.6 billion from about $1.2 billion at the end of the first quarter. Run-rate net debt to adjusted EBITDA ticked up to 5.6 times from 5.5 times in the first quarter and 5.4 times at year-end 2025.
Capital recycling activity accelerated, with roughly $200 million of joint-venture acquisitions and $83 million of dispositions since the first-quarter report, compared with about $125 million of total transaction activity in the first quarter. In early July, Healthcare Realty executed a letter of intent for a $120 million redevelopment of the Ascension Saint Thomas West campus, committing $35 million of its own capital to the project.
The release did not include the governance and cost disclosures that accompanied the prior two quarters, when the company announced director Jay Leupp's retirement and, before that, new chief executive and chief financial officer appointments alongside a $10 million run-rate reduction in general and administrative expenses.