PRESS RELEASE | ||
Financial Contact: | ||
Robert A. Milligan | ||
Chief Financial Officer | ||
480.998.3478 |
• | Net Income Attributable to Common Stockholders was $15.3 million, or $0.07 per diluted share, for Q4 2018. |
• | Funds From Operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), was $85.2 million, or $0.41 per diluted share, for Q4 2018. |
• | Normalized FFO was $84.2 million, or $0.40 per diluted share, for Q4 2018. |
• | Normalized Funds Available for Distribution (“FAD”) was $68.3 million for Q4 2018. |
• | Same-Property Cash Net Operating Income (“NOI”) increased 2.7%, to $111.4 million, compared to Q4 2017. |
• | Leasing: HTA’s portfolio leased rate increased 20 basis points to 92.0%, compared to Q4 2017. During Q4 2018, HTA executed 0.6 million square feet of gross leasable area (“GLA”) of new and renewal leases. Re-leasing spreads increased to 4.4% while tenant retention for its Same-Property portfolio was 77% by GLA for Q4 2018. |
• | Capital Allocation: During Q4 2018, HTA paid down approximately $68 million in outstanding secured mortgage loans at an interest rate of approximately 5.5% per annum. HTA also repurchased $50.7 million of its outstanding common stock at an average price of $26.08 per share under its stock repurchase plan during Q4 2018. |
• | Net Income Attributable to Common Stockholders was $213.5 million, or $1.02 per diluted share, an increase of $0.68 per diluted share, compared to 2017. |
• | FFO, as defined by NAREIT, was $335.6 million, or $1.60 per diluted share, an increase of $0.07 per diluted share, compared to 2017. |
• | Normalized FFO was $340.4 million, or $1.62 per diluted share, an increase of 12.7%, compared to 2017. |
• | Normalized FAD was $285.3 million, an increase of 9.4%, compared to 2017. |
• | Same-Property Cash NOI increased 2.5%, to $308.9 million, compared to 2017. Excluding the medical office buildings (“MOBs”) located on HTA’s Forest Park Dallas campus, Same-Property Cash NOI growth was 2.9% for 2018. |
• | Leasing: During 2018, HTA executed approximately 2.8 million square feet of GLA of new and renewal leases, or over 12%, of the total GLA of its portfolio. Re-leasing spreads increased to 2.6% while tenant retention for its Same-Property portfolio was 81% by GLA for 2018. |
• | Debt: During 2018, HTA paid down approximately $241 million in outstanding secured mortgage loans, including the settlement of three cash flow hedges. Additionally, in August 2018, HTA modified its $200.0 million unsecured term loan, decreasing pricing at HTA’s current credit rating by 65 basis points and extending the maturity to 2024. |
• | Balance Sheet: HTA ended 2018 with total liquidity of $1.1 billion, inclusive of $126.2 million of cash and cash equivalents, resulting in total leverage of (i) 31.3%, measured as debt less cash and cash equivalents to total capitalization, and (ii) 5.4x, measured as debt less cash and cash equivalents to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for real estate (“Adjusted EBITDAre”). |
• | Dispositions: During 2018, HTA completed the disposition of 20 MOBs for an aggregate gross sales price of $308.6 million, representing approximately 1.2 million square feet of GLA, and generating net gains of $166.0 million. These dispositions primarily consisted of the Q3 2018 disposition of its Greenville, South Carolina MOB portfolio (the “Greenville Disposition”), for an aggregate gross sales price of $294.3 million at a low 5% forward cap rate, including any releasing impacts and capital expenditures. HTA acquired the portfolio for $163 million in September 2009 and generated approximately 2% growth per annum, resulting in unlevered returns of over 13% during HTA’s period of ownership. |
• | Stock Repurchases: In August 2018, HTA’s Board of Directors approved a stock repurchase plan authorizing HTA to purchase up to $300.0 million of its outstanding common stock from time to time. During 2018, HTA repurchased approximately 2.6 million shares of its outstanding common stock for an aggregate amount of $67.2 million under its stock repurchase plan. Subsequent to December 31, 2018, HTA repurchased approximately 346,000 shares of its outstanding common stock at an average price of $24.65 per share under its stock repurchase plan. |
• | Development/Redevelopment: During 2018, HTA announced (i) a new development in its key gateway market of Miami, Florida and (ii) commenced two redevelopments, including an agreement to build a new on-campus MOB in Raleigh, North Carolina. These projects will have total expected construction costs of $70.6 million and are 78% pre-leased to major health systems. |
• | Forest Park Update: During 2018, HTA entered into approximately 87,000 square feet of GLA of new leases on the Forest Park Dallas campus. The total leased rate was approximately 86% as of December 31, 2018. |
• | 2017 Investment Performance: During Q4 2018, HTA generated $36.9 million of Cash NOI from its 2017 investments, including its investment in its unconsolidated joint venture. As of December 31, 2018, HTA’s run rate on its 2017 investments was approximately 5.4%, which included the full year impact of new leases which have been executed, but which have not yet commenced. |
• | Dividend: On February 14, 2019, HTA’s Board of Directors announced a quarterly cash dividend of $0.310 per share of common stock and per OP Unit. The quarterly dividend is to be paid on April 10, 2019 to stockholders of record of its common stock and holders of its OP Units on April 3, 2019. |
• | Topic 842 Leases: The Financial Accounting Standards Board issued Topic 842, which was effective for HTA as of January 1, 2019. Topic 842 modifies the treatment of initial direct costs, which historically under Topic 840 have been capitalized upon meeting criteria provided for in that applicable guidance. These initial direct costs now under ASC 842 are eligible for capitalization only if they are incremental in nature (i.e. would only be incurred if HTA enters into a new lease arrangement). Under this guidance, HTA anticipates only commissions paid and other incurred costs incremental to HTA’s leasing activity will qualify as initial direct costs. For the year ended December 31, 2018, HTA capitalized approximately $4.9 million of initial direct costs (as defined by ASC 840). Upon adoption, certain of these initial direct costs will be classified as general and administrative expenses on HTA’s consolidated statements of operations. HTA estimates the range of these additional expenses to be approximately $4 million to $5 million on an annualized basis. |
Annual Expectations | ||||
Low | to | High | ||
Net income attributable to common stockholders per share | $0.33 | $0.36 | ||
Same-Property Cash NOI | 2.0% | 3.0% | ||
FFO per share, as defined by NAREIT | $1.61 | $1.66 | ||
Normalized FFO per share | $1.62 | $1.67 |
Year Ended December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Land | $ | 481,871 | $ | 485,319 | ||||
Building and improvements | 5,787,152 | 5,830,824 | ||||||
Lease intangibles | 599,864 | 639,199 | ||||||
Construction in progress | 4,903 | 14,223 | ||||||
6,873,790 | 6,969,565 | |||||||
Accumulated depreciation and amortization | (1,208,169 | ) | (1,021,691 | ) | ||||
Real estate investments, net | 5,665,621 | 5,947,874 | ||||||
Investment in unconsolidated joint venture | 67,172 | 68,577 | ||||||
Cash and cash equivalents | 126,221 | 100,356 | ||||||
Restricted cash | 7,309 | 18,204 | ||||||
Receivables and other assets, net | 223,415 | 207,857 | ||||||
Other intangibles, net | 98,738 | 106,714 | ||||||
Total assets | $ | 6,188,476 | $ | 6,449,582 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Debt | $ | 2,541,232 | $ | 2,781,031 | ||||
Accounts payable and accrued liabilities | 185,073 | 167,852 | ||||||
Derivative financial instruments - interest rate swaps | — | 1,089 | ||||||
Security deposits, prepaid rent and other liabilities | 59,567 | 61,222 | ||||||
Intangible liabilities, net | 61,146 | 68,203 | ||||||
Total liabilities | 2,847,018 | 3,079,397 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interests | 6,544 | 6,737 | ||||||
Equity: | ||||||||
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 205,267,349 and 204,892,118 shares issued and outstanding as of December 31, 2018 and 2017, respectively | 2,053 | 2,049 | ||||||
Additional paid-in capital | 4,525,969 | 4,508,528 | ||||||
Accumulated other comprehensive income | 307 | 274 | ||||||
Cumulative dividends in excess of earnings | (1,272,305 | ) | (1,232,069 | ) | ||||
Total stockholders’ equity | 3,256,024 | 3,278,782 | ||||||
Noncontrolling interests | 78,890 | 84,666 | ||||||
Total equity | 3,334,914 | 3,363,448 | ||||||
Total liabilities and equity | $ | 6,188,476 | $ | 6,449,582 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 172,204 | $ | 173,607 | $ | 696,030 | $ | 612,556 | |||||||
Interest and other operating income | 94 | 163 | 396 | 1,434 | |||||||||||
Total revenues | 172,298 | 173,770 | 696,426 | 613,990 | |||||||||||
Expenses: | |||||||||||||||
Rental | 55,253 | 53,273 | 220,617 | 192,147 | |||||||||||
General and administrative | 8,915 | 8,225 | 35,196 | 33,403 | |||||||||||
Transaction | 70 | 267 | 1,003 | 5,885 | |||||||||||
Depreciation and amortization | 69,566 | 72,086 | 279,630 | 244,986 | |||||||||||
Impairment | — | 8,829 | 8,887 | 13,922 | |||||||||||
Total expenses | 133,804 | 142,680 | 545,333 | 490,343 | |||||||||||
Income before other income (expense) | 38,494 | 31,090 | 151,093 | 123,647 | |||||||||||
Interest income (expense): | |||||||||||||||
Interest related to derivative financial instruments | 397 | (204 | ) | 694 | (1,031 | ) | |||||||||
Gain on change in fair value of derivative financial instruments, net | — | — | — | 884 | |||||||||||
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments | 397 | (204 | ) | 694 | (147 | ) | |||||||||
Interest related to debt | (24,854 | ) | (25,656 | ) | (102,543 | ) | (85,344 | ) | |||||||
(Loss) gain on sale of real estate, net | (395 | ) | 37,799 | 165,977 | 37,802 | ||||||||||
Gain (loss) on extinguishment of debt, net | 1,334 | — | 242 | (11,192 | ) | ||||||||||
Income from unconsolidated joint venture | 330 | 401 | 1,735 | 782 | |||||||||||
Other income | 299 | 42 | 428 | 29 | |||||||||||
Net income | $ | 15,605 | $ | 43,472 | $ | 217,626 | $ | 65,577 | |||||||
Net income attributable to noncontrolling interests | (276 | ) | (946 | ) | (4,163 | ) | (1,661 | ) | |||||||
Net income attributable to common stockholders | $ | 15,329 | $ | 42,526 | $ | 213,463 | $ | 63,916 | |||||||
Earnings per common share - basic: | |||||||||||||||
Net income attributable to common stockholders | $ | 0.07 | $ | 0.21 | $ | 1.04 | $ | 0.35 | |||||||
Earnings per common share - diluted: | |||||||||||||||
Net income attributable to common stockholders | $ | 0.07 | $ | 0.20 | $ | 1.02 | $ | 0.34 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 206,409 | 204,434 | 206,065 | 181,064 | |||||||||||
Diluted | 210,338 | 208,626 | 210,061 | 185,278 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 217,626 | $ | 65,577 | $ | 47,345 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 271,441 | 239,044 | 175,285 | ||||||||
Share-based compensation expense | 9,755 | 6,870 | 7,071 | ||||||||
Impairment | 8,887 | 13,922 | 3,080 | ||||||||
Income from unconsolidated joint venture | (1,735 | ) | (782 | ) | — | ||||||
Distributions from unconsolidated joint venture | 2,665 | 750 | — | ||||||||
Gain on sale of real estate, net | (165,977 | ) | (37,802 | ) | (8,966 | ) | |||||
(Gain) loss on extinguishment of debt, net | (242 | ) | 11,192 | 3,025 | |||||||
Change in fair value of derivative financial instruments | — | (884 | ) | (1,344 | ) | ||||||
Changes in operating assets and liabilities: | |||||||||||
Receivables and other assets, net | (17,558 | ) | (33,295 | ) | (21,234 | ) | |||||
Accounts payable and accrued liabilities | 9,478 | 37,406 | 2,171 | ||||||||
Prepaid rent and other liabilities | 3,056 | 5,545 | (2,738 | ) | |||||||
Net cash provided by operating activities | 337,396 | 307,543 | 203,695 | ||||||||
Cash flows from investing activities: | |||||||||||
Investments in real estate | (17,389 | ) | (2,383,581 | ) | (591,954 | ) | |||||
Investment in unconsolidated joint venture | — | (68,839 | ) | — | |||||||
Development of real estate | (34,270 | ) | (25,191 | ) | — | ||||||
Proceeds from the sale of real estate | 305,135 | 80,640 | 26,555 | ||||||||
Capital expenditures | (77,870 | ) | (64,833 | ) | (42,994 | ) | |||||
Collection of real estate notes receivable | 703 | 9,964 | — | ||||||||
Advances on real estate notes receivable | — | (3,256 | ) | — | |||||||
Net cash provided by (used in) investing activities | 176,309 | (2,455,096 | ) | (608,393 | ) | ||||||
Cash flows from financing activities: | |||||||||||
Borrowings on unsecured revolving credit facility | 145,000 | 570,000 | 574,000 | ||||||||
Payments on unsecured revolving credit facility | (145,000 | ) | (658,000 | ) | (704,000 | ) | |||||
Proceeds from unsecured senior notes | — | 900,000 | 347,725 | ||||||||
Borrowings on unsecured term loans | — | — | 200,000 | ||||||||
Payments on unsecured term loans | — | — | (155,000 | ) | |||||||
Payments on secured mortgage loans | (241,021 | ) | (77,024 | ) | (110,935 | ) | |||||
Deferred financing costs | (782 | ) | (16,904 | ) | (3,191 | ) | |||||
Debt extinguishment costs | (1,909 | ) | (10,571 | ) | — | ||||||
Security deposits | — | 2,419 | 924 | ||||||||
Proceeds from issuance of common stock | 72,814 | 1,746,956 | 418,891 | ||||||||
Issuance of OP Units | 411 | — | 2,706 | ||||||||
Repurchase and cancellation of common stock | (70,319 | ) | (3,413 | ) | (2,642 | ) | |||||
Dividends paid | (252,651 | ) | (207,087 | ) | (159,174 | ) | |||||
Distributions paid to noncontrolling interest of limited partners | (5,278 | ) | (5,308 | ) | (3,951 | ) | |||||
Redemption of redeemable noncontrolling interest | — | — | (4,572 | ) | |||||||
Net cash (used in) provided by financing activities | (498,735 | ) | 2,241,068 | 400,781 | |||||||
Net change in cash, cash equivalents and restricted cash | 14,970 | 93,515 | (3,917 | ) | |||||||
Cash, cash equivalents and restricted cash - beginning of year | 118,560 | 25,045 | 28,962 | ||||||||
Cash, cash equivalents and restricted cash - end of year | $ | 133,530 | $ | 118,560 | $ | 25,045 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 15,605 | $ | 43,472 | $ | 217,626 | $ | 65,577 | |||||||
General and administrative expenses | 8,915 | 8,225 | 35,196 | 33,403 | |||||||||||
Transaction expenses (1) | 70 | 267 | 1,003 | 5,885 | |||||||||||
Depreciation and amortization expense | 69,566 | 72,086 | 279,630 | 244,986 | |||||||||||
Impairment | — | 8,829 | 8,887 | 13,922 | |||||||||||
Interest expense and net change in fair value of derivative financial instruments | 24,457 | 25,860 | 101,849 | 85,491 | |||||||||||
Loss (gain) on sale of real estate, net | 395 | (37,799 | ) | (165,977 | ) | (37,802 | ) | ||||||||
(Gain) loss on extinguishment of debt, net | (1,334 | ) | — | (242 | ) | 11,192 | |||||||||
Income from unconsolidated joint venture | (330 | ) | (401 | ) | (1,735 | ) | (782 | ) | |||||||
Other income | (299 | ) | (42 | ) | (428 | ) | (29 | ) | |||||||
NOI | $ | 117,045 | $ | 120,497 | $ | 475,809 | $ | 421,843 | |||||||
NOI percentage growth | (2.9 | )% | 12.8 | % | |||||||||||
NOI | $ | 117,045 | $ | 120,497 | $ | 475,809 | $ | 421,843 | |||||||
Straight-line rent adjustments, net | (2,394 | ) | (2,803 | ) | (10,683 | ) | (8,637 | ) | |||||||
Amortization of (below) and above market leases/leasehold interests, net | 26 | 108 | 216 | 354 | |||||||||||
Notes receivable interest income | (30 | ) | (104 | ) | (131 | ) | (1,193 | ) | |||||||
Other GAAP adjustments | — | 55 | (117 | ) | (19 | ) | |||||||||
Cash NOI | $ | 114,647 | $ | 117,753 | $ | 465,094 | $ | 412,348 | |||||||
Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI | (834 | ) | (6,027 | ) | (147,881 | ) | (99,043 | ) | |||||||
Redevelopment Cash NOI | (349 | ) | (725 | ) | (2,273 | ) | (4,797 | ) | |||||||
Intended for sale Cash NOI | (2,074 | ) | (2,581 | ) | (6,055 | ) | (7,161 | ) | |||||||
Same-Property Cash NOI (2) | $ | 111,390 | $ | 108,420 | $ | 308,885 | $ | 301,347 | |||||||
Same-Property Cash NOI percentage growth | 2.7 | % | 2.5 | % | |||||||||||
(1) For the year ended December 31, 2017, transaction costs included $4.6 million of non-incremental costs related to the Duke acquisition. | |||||||||||||||
(2) Same-Property includes 409 and 318 buildings for the three months and year ended December 31, 2018 and 2017, respectively. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income attributable to common stockholders | $ | 15,329 | $ | 42,526 | $ | 213,463 | $ | 63,916 | |||||||
Depreciation and amortization expense related to investments in real estate | 69,001 | 71,543 | 277,446 | 243,221 | |||||||||||
Loss (gain) on sale of real estate, net | 395 | (37,799 | ) | (165,977 | ) | (37,802 | ) | ||||||||
Impairment | — | 8,829 | 8,887 | 13,922 | |||||||||||
Proportionate share of joint venture depreciation and amortization | 469 | 463 | 1,746 | 969 | |||||||||||
FFO attributable to common stockholders | $ | 85,194 | $ | 85,562 | $ | 335,565 | $ | 284,226 | |||||||
Transaction expenses | 70 | 267 | 859 | 1,242 | |||||||||||
Gain on change in fair value of derivative financial instruments, net | — | — | — | (884 | ) | ||||||||||
(Gain) loss on extinguishment of debt, net | (1,334 | ) | — | (242 | ) | 11,192 | |||||||||
Noncontrolling income from OP Units included in diluted shares | 252 | 903 | 4,074 | 1,538 | |||||||||||
Other normalizing items, net (1) | — | — | 144 | 4,643 | |||||||||||
Normalized FFO attributable to common stockholders | $ | 84,182 | $ | 86,732 | $ | 340,400 | $ | 301,957 | |||||||
Other income | (299 | ) | (42 | ) | (428 | ) | (29 | ) | |||||||
Non-cash compensation expense | 1,925 | 1,377 | 9,755 | 6,870 | |||||||||||
Straight-line rent adjustments, net | (2,394 | ) | (2,803 | ) | (10,683 | ) | (8,637 | ) | |||||||
Amortization of (below) and above market leases/leasehold interests and corporate assets, net | 592 | 652 | 2,401 | 2,119 | |||||||||||
Deferred revenue - tenant improvement related | (1 | ) | (5 | ) | (71 | ) | (28 | ) | |||||||
Amortization of deferred financing costs and debt discount/premium, net | 1,403 | 1,287 | 5,260 | 4,216 | |||||||||||
Recurring capital expenditures, tenant improvements and leasing commissions | (17,117 | ) | (14,588 | ) | (61,375 | ) | (45,608 | ) | |||||||
Normalized FAD attributable to common stockholders | $ | 68,291 | $ | 72,610 | $ | 285,259 | $ | 260,860 | |||||||
Net income attributable to common stockholders per diluted share | $ | 0.07 | $ | 0.20 | $ | 1.02 | $ | 0.34 | |||||||
FFO adjustments per diluted share, net | 0.34 | 0.21 | 0.58 | 1.19 | |||||||||||
FFO attributable to common stockholders per diluted share | $ | 0.41 | $ | 0.41 | $ | 1.60 | $ | 1.53 | |||||||
Normalized FFO adjustments per diluted share, net | (0.01 | ) | 0.01 | 0.02 | 0.10 | ||||||||||
Normalized FFO attributable to common stockholders per diluted share | $ | 0.40 | $ | 0.42 | $ | 1.62 | $ | 1.63 | |||||||
Weighted average diluted common shares outstanding | 210,338 | 208,626 | 210,061 | 185,278 | |||||||||||
(1) For the year ended December 31, 2017, other normalizing items included $4.6 million of non-incremental costs related to the Duke acquisition that were included in transaction expenses on HTA’s consolidated statements of operations. |
Three Months Ended | |||
December 31, 2018 | |||
Net income | $ | 15,605 | |
Interest expense | 24,457 | ||
Depreciation and amortization expense | 69,566 | ||
Loss on sale of real estate | 395 | ||
Proportionate share of joint venture depreciation and amortization | 469 | ||
EBITDAre | $ | 110,492 | |
Transaction expenses | 70 | ||
Gain on extinguishment of debt, net | (1,334 | ) | |
Non-cash compensation expense | 1,925 | ||
Pro forma impact of dispositions | (144 | ) | |
Adjusted EBITDAre | $ | 111,009 | |
Adjusted EBITDAre, annualized | $ | 444,036 | |
As of December 31, 2018: | |||
Debt | $ | 2,541,232 | |
Cash and cash equivalents | (126,221 | ) | |
Net Debt | $ | 2,415,011 | |
Net Debt to Adjusted EBITDAre | 5.4 | x |