Oct 30, 2026 earnings call — Leasing momentum and capital allocation update
Raised full-year normalized FFO guidance to $1.65-$1.67 and reported normalized FFO of $0.42 per share for the quarter.
Revenue $0.3B (est $0.3B) · EPS $-0.05 (est $0.01)
Key quotes
"Strong operating momentum continued in the third quarter. We completed approximately 1.5 million sq ft of new and renewal leasing and produced more than 85,000 sq ft of positive same-store absorption, increasing occupancy 30 basis points sequentially to 93.1%."
"On stock buybacks, during the quarter and through October, we repurchased $75 million of stock at an average price of approximately $17.75, bringing our year-to-date total to $250 million."
"Medical office can deliver mid-single-digit growth with the tailwinds we are experiencing, and our results show it. Tenant demand continues to rise with the needs of an aging population."
Analyst Q&A 12
Cash leasing spreads and occupancy
Q (Rich Anderson · Cantor Fitzgerald): Is the 8.6% cash leasing spread repeatable and what long-term run rate should we model for cash leasing spreads and same-store NOI for HR?
A: Management said the quarter and year have been strong and occupancy improved from 89% to 93%. They said 8.6% is a great number, it benefited from West Campus and Ascension, and even stripping those out they are still above 6%. They are aiming to keep trying to get to the mid-5% area or better and will push where they have pricing power.
"As we think about cash leasing spreads, I think we have always been pretty consistent over the last year and a half, that it needs to be better than what it historically has been." — Pete Scott (CEO)
Transaction cap rates and acquisitions
Q (Michael Stroyeck · Green Street): Is the transaction market repricing given higher rates and are you seeing bidding tension? Also remind us where pricing is on the JV deals excluding fees and whether expectations changed.
A: Management said core cap rates have held in the 5.5%-6% range and core-plus in the 6%-6.5% range, and private demand for MOBs remains deep. They said weaker assets are seeing more cap-rate pressure because those buyers rely more on leverage. They noted the blended cap rates on their recent buys sit in the 6%-6.5% range and asset management fees push returns into the sevens, and they do not include acquisitions in guidance.
"Look, from our perspective, we're still seeing core cap rates in the 5.5%-6% area and core plus in the 6%-6.5% area." — Pete Scott (CEO)
Tenant improvements and occupancy advantage
Q (Omotayo Okusanya · Deutsche Bank): How are tenant improvement and leasing commission costs evolving and what are you doing to reduce that drag? Also, can you get occupancy meaningfully above the industry?
A: They said they revamped the leasing model about a year and a half ago and shifted to being economics-driven, limiting capital outlays. Tenants increasingly pay for build-outs, redevelopments have higher TI, and higher retention reduces capital spend and boosts lease profitability. Same-store occupancy rose from 89% to 93% and they expect to do better than market, with total occupancy trending toward 91% and a pipeline that could move same-store closer to 94%.
"The more tenants you retain, the less capital you put out the door, the more profitable the lease deal is to us." — Pete Scott (CEO)
Redevelopment upside timing
Q (Nick Yulico · Scotiabank): On the portfolio optimisation slide, has the projected NOI upside already been captured and how much incremental upside remains through next year? Also, why is FFO growing faster than FAD and what's driving straight-line rent adjustments?
A: Dan said the slide will be updated regularly and the redevelopments and lease-up gains are back-end weighted across the three-year plan. They aim to recapture 40 of the 50 million of lost NOI over the plan and expect much of the upside to come later, into 2027 and 2028. Pete added they accelerated large renewals to extend lease terms, which gives initial FFO benefit with FAD following as straight-line and cash flows normalize.
"As we've always talked about with the redevelopments, especially in the lease-up portfolio, over the course of the three-year plan, this was more backend weighted." — Dan Gabbay
Dispositions and 4Q FFO range
Q (Jesus Gonzalez · Wells Fargo): How large is the remaining disposition pool that could fund JV investments or buybacks? And why won't 4Q move above the $0.40-$0.42 normalized FFO range despite buybacks and acquisitions?
A: Pete said that strategic sales would be a source of capital given they are around mid-5x net debt to EBITDA and they are open to selling assets to recycle capital into buybacks and JV acquisitions when trading at a discount to NAV. Dan said they set a conservative Q4 range given small absolute numbers and feel good about the business but will report results in February. They do not guide to asset-sale-driven capital allocation.
"As we think about additional JV investments and buybacks, since we are right around that mid-5x net debt to EBITDA, a source of capital would certainly be strategic sales." — Pete Scott (CEO)
NOI drivers and disposition process
Q (Connor Mitchell · UBS): What are the building blocks that could push same-store NOI upside or downside for Q4, and how do dispositions work—are assets marketed or inbound from private buyers and health systems?
A: They said Q4 guidance assumes less absorption than recent quarters, so they are being conservative, and reiterated the building blocks are 3% escalators in place plus cash leasing spreads and occupancy gains to drive above a 3%-4% baseline. On dispositions, Pete said sales back to health systems are usually inbound and off-market—health systems call them— and they prefer off-market execution when possible.
"When you think about the fourth quarter, I would just say that we are not forecasting as much absorption." — Pete Scott (CEO)
JV capacity and lease economics focus
Q (Seth Bergey · Citi): Was the JV's decision to buy more assets capacity constrained or deal-specific? And where are you focusing most to improve lease economics as fundamentals improve?
A: Pete said conversations with the partner are ongoing and they screen opportunities to fit underwriting, pursuing selectively. Year-to-date they committed about $70 million into JV acquisitions (their share) and bought back $250 million of stock, and they shift between JV deals and buybacks depending on public vs private market value. On lease economics they push cash leasing spreads, escalators (3% now the floor) and retention, all of which are moving in the right direction.
"At times where we feel like our stock is trading a little bit better, we'll probably lean in more to doing JV acquisitions." — Pete Scott (CEO)
Health system consolidation effects
Q (Robin Haneland · BMO): Is consolidation creating overlapping locations that reduce space needs and strengthen tenant negotiation leverage? And what does the 8.6% leasing spread imply about remaining mark-to-market opportunity into 2027?
A: Pete said the recent consolidation is more about getting bigger and achieving synergies, not about exiting markets, so there's almost no overlap and the trend is complementary to demand. He added that consolidation and improving health-system profitability can help extract better lease deals. On mark-to-market opportunity, he said it's in the mid-single digits or slightly better.
"I would say there's almost no overlap in this consolidation." — Pete Scott (CEO)
Markets with lease-up opportunities
Q (Siti · JPMorgan): Are there particular markets where remaining lease-up opportunities are concentrated to push total portfolio and same-store occupancy higher?
A: Pete said it is not especially concentrated but they see stronger performance in the Southeast markets and in Seattle. He said Phoenix and some pockets in Texas have more upside from an occupancy perspective, and acquisitions have focused on markets where they are having success.
"Where we are having more success is certainly in the Southeast markets and a little bit up in Seattle." — Pete Scott (CEO)
Lease expirations and other capital uses
Q (Dave Rodgers · Raymond James): With expirations falling to about 3.1 million sq ft for next year, what is the outlook for re-leasing and confidence in retention? And are there other capital deployment opportunities beyond JV or buybacks, like lending or development funding?
A: Pete said they've materially improved the lease expiration schedule and view roll as an opportunity, not a problem, and he expects retention in the mid-to-high 80s for expiring square footage. On capital uses, they have done selective debt financing but expect to increase percent of NOI in joint ventures and pursue JV partners rather than doing dilutive development, since development is challenged by high construction costs and pre-leasing requirements.
"My view on retention would be no different than the retention numbers that I have quoted, in the mid to high 80s being a good underwriting assumption for what we think will happen with that expiring square footage." — Pete Scott (CEO)
Mark-to-market vs development rents
Q (Austin Wurschmidt · KeyBanc): How does the leasing spread vs new development rents compare now and over five years, and what development yields would justify doing development given interest rates?
A: Pete pointed to page 17 of the investor deck showing the spread between new construction rents and in-place rents continues to widen because construction costs keep rising. He said developers are requiring much higher pre-leasing and that development is currently dilutive, so development activity is likely to remain low unless pre-leasing and yields make the math work.
"I would point you to page 17, and if anything, that spread just continues to widen, and that is a function of construction costs continue to increase." — Pete Scott (CEO)
Health system partnerships and growth focus
Q (Michael Carroll · RBC): How are discussions with health systems going—do they want to grow on-campus or off-campus? And can you serve their expansion with your existing portfolio or will development be required?
A: Pete said health systems are focused on growth both on and off campus, including outpatient surgery centers. He said HR has spent more time with health systems, creating many win-win transactions and lease deals, and that current expansions are more often served by leasing existing portfolio space rather than new development.
"Every conversation we have with a health system, we learn something new, and we are able to come up with a lot of win-win type transactions." — Pete Scott (CEO)