Healthcare Realty Trust Incorporated (HR): Business Model Canvas [Dec-2025 Updated]

You're trying to map out the strategy for Healthcare Realty Trust Incorporated now that they've fully committed to the Healthcare Realty 2.0 plan, and honestly, it's a fascinating pivot for a specialized REIT. Based on my two decades tracking this space, their model is now laser-focused on operational excellence within their $\sim$$9.86 billion portfolio of outpatient medical facilities, driving TTM revenue of $\sim$$1.18 billion while actively shedding non-core assets. They are betting big on long-term relationships with major health systems to maintain high occupancy and those steady lease escalators. This is a lean, operations-first approach to real estate investment. See the full breakdown below to understand the mechanics behind their disciplined capital allocation and $\sim$$500 million debt reduction goal for the year.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that keep Healthcare Realty Trust Incorporated (HR) running smoothly, especially now under the new leadership and the 'Healthcare Realty 2.0' strategic plan. These partnerships are critical for both capital structure and portfolio quality.

The foundation of Healthcare Realty Trust Incorporated's strategy rests on its relationships with major healthcare providers. You know that proximity to top health systems drives leasing success in medical office buildings (MOBs). For instance, the partnership with Baylor Scott & White Health remains significant; they recently launched a statewide partnership in September 2025 to expand outpatient mental healthcare access. This builds on prior activity, like when Healthcare Realty Trust Incorporated acquired the Baylor Healthcare System portfolio, adding 20 properties in the Dallas-Fort Worth area, which represented a $1.9B investment as of July 2022. While Baptist Memorial Health Care is a major player in the sector, specific 2025 partnership details weren't immediately clear in recent filings, but the overall strategy involves working with the nation's top health systems.

Financing these operations requires strong ties with financial institutions. Healthcare Realty Trust Incorporated received strong support from its lenders recently. Here's a snapshot of the capital structure moves as of the second quarter of 2025:

The successful extension of the $1.5 billion revolver to 2030 is a big win for near-term stability; it shows lenders trust the new management team's direction.

To optimize the portfolio, Healthcare Realty Trust Incorporated actively partners with third-party buyers for asset dispositions. This helps fund growth and improve portfolio focus. As of July 31, 2025, the company had significant asset sales activity:

• Year-to-date sales completed through July 2025: $210.5 million across 9 separate transactions.
• Additional sales under contract or Letter of Intent (LOI): $700 million.

That $700 million figure shows a clear intent to reshape the asset base quickly. It's defintely a key focus area for the new leadership.

Finally, development and construction firms are essential for executing the growth pipeline. While specific firm names aren't detailed in the latest summaries, the Strategic Plan highlights an expanded development pipeline as a source of future value creation. These firms translate the strategy into physical assets, often working on projects adjacent to or on-campus with major hospital partners.

Finance: draft the projected impact of the $700 million disposition pipeline on 2026 leverage ratios by next Tuesday.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Key Activities

You're looking at the core engine driving Healthcare Realty Trust Incorporated's performance as of late 2025. The key activities focus heavily on operational excellence within their existing portfolio while aggressively optimizing the asset base for the future.

Active asset management to maintain high occupancy in 470 Stabilized assets.

The focus here is squeezing maximum value from the core holdings. The stabilized portfolio, which represents about 75% of total assets, saw its same-store occupancy climb to 91.1% by the third quarter of 2025, a sequential increase of 90 basis points. Management noted that occupancy across the top 100 metros is now approaching an all-time record of 93%. The lease-up portfolio, which is still finding its footing, reported an occupancy of 70% in the second quarter of 2025. The average in-place rent across the Medical Office Building (MOB) portfolio was reported at $25 per square foot in the first quarter of 2025, with built-in annual lease escalators routinely at 3% or better.

The results of this active management are visible in the same-store performance metrics:

• Same-Store Cash NOI Growth for 2025 was raised to a range of 4.00% - 4.75%.
• Q3 2025 Same-Store Cash NOI Growth hit 5.4% year-over-year.
• The stabilized portfolio carries average lease escalators of 3%.

Leasing and property management of outpatient medical facilities.

Leasing activity is a major operational driver, especially with market demand exceeding supply for the seventeenth straight quarter. You saw strong execution in the third quarter, which is key to pushing those lease economics higher.

Here's a breakdown of recent leasing performance:

The average annual escalator across the total portfolio improved to 3.1%.

Portfolio optimization via disposition of non-core assets and Lease-Up of properties.

This activity is squarely aimed at improving the balance sheet and focusing on higher-quality, on-campus assets. The company is actively shedding properties that require significant capital or are considered non-core. Year-to-date through October 2025, asset sales totaled $486 million at a blended capitalization rate of 6.5%. Furthermore, an additional $700 million of dispositions are under contract or LOI, with the majority expected to close by the next earnings call. The lease-up portfolio offers upside, as rents there are approximately 20% below market.

Capital is also being deployed into strategic redevelopment:

• Two projects are expected to stabilize with approximately $8 million in NOI.
• Five new asset redevelopments carry a combined budget of $60 million, anticipating nearly $8 million in incremental NOI.

Disciplined capital allocation, including debt paydown of approximately $500 million in 2025.

Deleveraging is a clear priority, directly supported by the disposition proceeds. Healthcare Realty Trust Incorporated has paid down approximately $500 million of notes and term loans year-to-date in 2025 (through October). This included repaying $225 million of 2027 term loans in the third quarter and fully repaying a $151 million term loan due in May 2027 in October. This activity has driven the run-rate Net Debt to Adjusted EBITDA down to 5.8x by the end of Q3 2025, with a year-end target range of 5.4x - 5.7x. Liquidity through October stood at approximately $1.3 billion.

Executing the 'Healthcare Realty 2.0' operations-oriented strategic plan.

The execution of this plan is evidenced by the raised guidance and improved operational metrics, showing that the focus on the core business is paying off. The company increased its full-year 2025 guidance for Normalized Funds From Operations (FFO) per share midpoint to a range of $1.59 to $1.61. General & Administrative (G&A) expense guidance for 2025 is set between $46 million and $49 million. The dividend was also right-sized to $0.24 per share, immediately reducing the FAD (Funds Available for Distribution) payout ratio to approximately 73% in Q3 2025.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Key Resources

You're looking at the foundational assets Healthcare Realty Trust Incorporated (HR) relies on to execute its strategy as of late 2025. The leadership structure itself is a key resource, with Peter Scott taking the helm as President and Chief Executive Officer effective April 15, 2025. He brings experience from his prior role as CFO at Healthpeak Properties, an S&P 500 company with approximately $25 billion in assets.

The sheer scale and financial backing of the enterprise are evident in the balance sheet and liquidity position reported through the third quarter of 2025. Here's a quick look at the hard numbers underpinning the business:

The portfolio of outpatient medical facilities across the US is the primary tangible asset. As of September 30, 2025, Healthcare Realty Trust Incorporated was invested in 579 real estate properties spanning 28 states. The company provided leasing and property management services to 94% of this portfolio. The focus remains heavily concentrated in specific growth markets, which is defintely a strategic choice.

• Dallas, TX: 3,500 (in thousands of square feet)
• Houston, TX: 2,100 (in thousands of square feet)
• Charlotte, NC: 1,700 (in thousands of square feet)
• Denver, CO: 1,700 (in thousands of square feet)
• Los Angeles, CA: 1,600 (in thousands of square feet)

Operational efficiency is driven by the proprietary asset management platform, which the COO indicated is nearing completion for rollout to boost accountability. You can see the platform's impact in the operational results from the third quarter of 2025. The company is clearly pushing for better performance metrics, which is what you'd expect from a newly focused management team.

• Same Store Cash NOI Growth: +5.4% (Q3 2025)
• Same Store Occupancy: 91.1% (Q3 2025 end)
• Tenant Retention: 88.6% (Q3 2025)
• Cash Leasing Spreads: +3.9% (Q3 2025)

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Value Propositions

You're looking at the core reasons why Healthcare Realty Trust Incorporated (HR) attracts and retains its high-value tenants. The value proposition centers on being the specialized landlord for the healthcare industry, which means offering assets perfectly suited for the ongoing migration of services outside of the traditional hospital setting.

Providing integral, on-campus and off-campus outpatient medical facilities.

Healthcare Realty Trust Incorporated (HR) offers a portfolio deeply integrated with the delivery system. The stabilized portfolio, which represents $\mathbf{75\%}$ of the total, is the primary engine of growth, consisting of $\mathbf{470}$ properties covering over $\mathbf{25}$ million square feet. These are trophy assets situated on flagship hospital campuses, but the value extends to strategically located off-campus sites as well. This dual presence supports the entire continuum of outpatient care your health system partners need.

High-quality, modern facilities supporting the shift to outpatient care.

The company is laser-focused on this sector, which is seeing secular trends where demand far exceeds supply; for the 17th straight quarter, occupancy increased across the top 100 metros, approaching an all-time record of $\mathbf{93\%}$ in those key areas. The stabilized portfolio itself boasts a $\mathbf{95\%}$ occupancy rate and NOI margins exceeding $\mathbf{65\%}$ as of Q2/Q3 2025. Furthermore, the lease-up portfolio, which is about $\mathbf{13\%}$ of the total, contains $\mathbf{95}$ assets across $\mathbf{7}$ million square feet where rents are nearly $\mathbf{20\%}$ below market, presenting a clear opportunity for value capture through targeted investment.

Here's a snapshot of the core stabilized portfolio performance:

Long-term, stable tenancy with average annual escalators of 3.1% to 3.2%.

Tenancy stability is a hallmark. Tenant retention in Q3 2025 hit nearly $\mathbf{89\%}$, marking the sixth consecutive quarter above $\mathbf{80\%}$. This sticky tenant base is secured with contractual rent growth. The average annual escalators across the total portfolio improved to $\mathbf{3.1\%}$ in Q3 2025, with Q2 2025 reporting $\mathbf{3.2\%}$. This predictable, contractual revenue growth is key to the investment thesis. You get reliable income growth baked into the leases.

Focused investment as the only public REIT exclusively on outpatient medical.

Healthcare Realty Trust Incorporated (HR) is positioned as the largest, pure-play owner, operator, and developer of medical outpatient buildings in the United States. This singular focus means every resource, every capital allocation decision, and every operational improvement is directed toward this specific, resilient asset class. This undivided attention allows the team to singularly focus on this objective, unlike peers with diversified real estate holdings.

Maximizing shareholder value through operational excellence and a lean cost structure.

The value proposition includes delivering superior operational results that translate directly to shareholder returns. The operational momentum is clear:

• Same-store cash NOI growth averaged $\mathbf{5.25\%}$ over the last two quarters of 2025.
• Same-store occupancy gained $\mathbf{77}$ basis points year-to-date.
• Net debt to EBITDA was reduced by $\mathbf{0.5}$ a turn over the last two quarters.
• 2025 G&A guidance was lowered to a range of $\mathbf{\$46}$ million to $\mathbf{\$49}$ million, reflecting restructuring efforts.
• The Q3 2025 quarterly payout ratio was $\mathbf{73\%}$ based on FAD of $\mathbf{33}$ cents per share.

The company raised its 2025 Normalized FFO per share guidance midpoint to $\mathbf{\$1.59}$ to $\mathbf{\$1.61}$, showing that operational rigor is already manifesting into better financial outcomes. Finance: draft 13-week cash view by Friday.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Customer Relationships

Dedicated asset management for long-term tenant retention was a key focus, resulting in a tenant retention rate of 88.6% in Q3 2025. This figure represents the highest retention in six years and the sixth consecutive quarter above 80%.

The relationship management is direct and professional, heavily weighted toward major health systems. Health system leasing comprised nearly 50% of total leasing activity in Q3 2025.

The transactional relationship for new leases saw 1.6 million square feet executed across all new and renewal leases during the third quarter.

High-touch service efforts are focused on Lease-Up assets to drive occupancy. Same store occupancy improved sequentially by 44 basis points, ending the quarter at 91.1%. A specific development in Fort Worth, TX, recently delivered and reached 72% leased.

Key Q3 2025 Leasing Metrics:

• Total executed leases: 1.6 million square feet.
• New lease executions: Over 441,000 square feet.
• Weighted average lease term: 5.8 years.
• Average annual escalator across the total portfolio: 3.1%.

Relationship success is visible in specific health system transactions:

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Channels

You're looking at how Healthcare Realty Trust Incorporated (HR) gets its value proposition-high-quality medical office buildings-to its customers and capital providers as of late 2025. The channels here are about direct engagement, digital presence, and strategic transactions.

Direct leasing and property management teams form the core of the operational channel. This structure is designed for high-touch service delivery, which is critical for healthcare tenants. As of September 30, 2025, Healthcare Realty Trust Incorporated provided leasing and property management services to 94% of its portfolio properties. This indicates a heavy reliance on internal teams rather than third-party managers for the bulk of the operational relationship.

The leasing channel showed solid activity through the third quarter of 2025. The company executed 333 new and renewal leases, totaling 1.6 million square feet in that quarter alone. Health system demand is a key driver here, making up approximately 48% of the signed lease volume during Q3. The average lease signed carried a weighted average term of 5.8 years with an average annual escalator of 3.1%.

The corporate website and investor relations function as the primary channel for capital markets communication. This digital presence is where Healthcare Realty Trust Incorporated disseminates critical financial updates to analysts and shareholders. For instance, the Q3 2025 results and related conference call information are published on the Investor Relations section of www.healthcarerealty.com. The company raised its full-year 2025 guidance for Normalized FFO per share to a range of $1.59 - $1.61. Furthermore, the run-rate Net Debt to Adjusted EBITDA was 5.8x as of Q3 2025, with an expectation to reduce this leverage to between 5.4x and 5.7x by year-end. The stock price as of December 4, 2025, was $17.50.

Brokerage networks are utilized strategically for portfolio optimization, specifically asset dispositions. This channel facilitates the sale of non-core assets to recycle capital into higher-growth opportunities. Year-to-date through October 2025, Healthcare Realty Trust Incorporated completed asset sales totaling $486 million at a blended cap rate of 6.5%. To be fair, they also have approximately $700 million of additional sales under contract or Letter of Intent (LOI), showing an active disposition pipeline.

On-site property management staff handle the day-to-day tenant needs, which directly impacts tenant satisfaction and retention-a key operational metric. The tenant retention rate for Q3 2025 was 88.6%. This high retention, coupled with a 90% occupancy rate, suggests the on-site teams are effectively managing tenant relationships and property functionality. The focus on operational performance, part of the 'Healthcare Realty 2.0' plan, emphasizes accountability at the asset level, which these on-site teams execute.

• Q3 2025 Same Store Cash NOI growth: +5.4%.
• Q3 2025 Cash Leasing Spreads: +3.9%.
• Q3 2025 Normalized FFO per share: $0.41.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Customer Segments

You're looking at the core clientele for Healthcare Realty Trust Incorporated (HR) as of late 2025, which is heavily weighted toward established medical providers and the capital markets that fund them.

Large US health systems and hospitals represent the most significant segment driving leasing activity. This group comprised approximately 48% of Healthcare Realty Trust Incorporated's signed lease volume during the third quarter of 2025. This focus on system partners is a clear strategic priority, up almost 20% from the low point seen in 2023. For example, Q3 2025 saw a new 21,000 square foot lease signed with Baptist Memorial Health in Memphis, and an 18,000 square foot lease executed with Baylor Scott & White in Fort Worth.

The overall portfolio composition reflects this focus on high-quality, integrated medical real estate. Here's a quick look at the scale and concentration as of September 30, 2025:

The second key segment involves the clinical operators who occupy the space. This includes multi-specialty physician groups and single-specialty practices. Furthermore, the tenant base extends to essential outpatient service providers. These providers include imaging centers, laboratories, and physical therapy facilities. Healthcare Realty Trust Incorporated's properties in high-growth markets support a broad mix, covering over 30 physician specialties, along with surgery, imaging, cancer, and diagnostic centers.

The final, distinct customer segment for Healthcare Realty Trust Incorporated is the capital markets, specifically institutional and individual investors (shareholders). These are the entities providing the equity base for the Real Estate Investment Trust (REIT) structure. As of the quarter ending September 30, 2025, the shares outstanding were 0.350B, representing a 2.51% decline year-over-year. The flow of capital in and out of the stock is a key indicator of investor sentiment.

Major institutional involvement shows significant activity:

• Total Institutional Inflows (last 12 months): $1.46B
• Total Institutional Outflows (last 12 months): $1.25B
• Institutional Ownership (based on 1000 largest holdings): 117.71% (Note: This figure likely reflects complex reporting or rehypothecation)
• Individual Ownership (based on 1000 largest holdings): 1%

Top shareholders as of late 2025 include major asset managers who are defintely key stakeholders in the company's performance. Here are some of the largest holders:

• Cohen & Steers Capital Management, Inc.
• The Vanguard Group, Inc.
• State Street Global Advisors, Inc.
• T. Rowe Price Group, Inc.

The board approved a quarterly dividend of $0.24 per share for Q3 2025, which is a direct return to this shareholder segment. Finance: draft 13-week cash view by Friday.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Cost Structure

You're looking at the core expenses Healthcare Realty Trust Incorporated (HR) faces to keep its portfolio running and growing as of late 2025. These are the outlays that directly impact the bottom line before considering financing costs.

A major financial commitment is the servicing of outstanding borrowings. This translates to a significant interest expense on Total Debt, which is cited in context as approximately $\$4.72$ billion (TTM Sep 30, 2025). This debt load is being actively managed; for instance, run-rate Net Debt to Adjusted EBITDA stood at 5.8x as of the third quarter of 2025, with expectations to reach between 5.4x and 5.7x by year-end 2025 through asset sales.

The day-to-day running of the medical office buildings requires consistent spending on property operating expenses. For the twelve months ending September 30, 2025, these expenses totaled $\$0.895$B, which represented a $40.01\%$ decline year-over-year. Management noted that sub-2% property operating expenses were a factor in the strong same-store NOI growth seen in Q3 2025.

Keeping the corporate structure lean is a focus, reflected in the General and Administrative (G&A) expenses. The guidance for the full year 2025 is set between $\$46$ million and $\$49$ million. This reflects restructuring efforts, including headcount reductions from 410 to approximately 350 employees, which are expected to generate $\$10$ million in annual G&A savings, with about $\$5$ million realized in 2025.

Investing in the future of the portfolio involves capital expenditures for tenant improvements and redevelopment projects. Healthcare Realty Trust Incorporated (HR) utilizes a specific classification for properties undergoing redevelopment, which involves capital expenditures significantly above routine maintenance. The company added five new assets to the redevelopment portfolio in Q3 2025, with an incremental stabilized Net Operating Income (NOI) expectation of nearly $\$8$ million from these new projects. This is part of a broader strategy to unlock value through targeted reinvestment.

Here's a look at the key cost components:

• G&A Expense Guidance (2025): $\$46$ million to $\$49$ million.
• Property Operating Expenses (TTM Sep 30, 2025): $\$895$ million.
• Debt Context (TTM Sep 30, 2025): Net Debt to Adjusted EBITDA of 5.8x.
• Debt Paydown in 2025 (YTD Q3): Approximately $\$500$ million of notes and term loans paid down.
• Redevelopment Pipeline: Five new assets added in Q3 2025 targeting nearly $\$8$ million incremental NOI.

You can see the relationship between some of these expense categories and operational metrics in the table below:

Finance: review the impact of the 5.8x Net Debt to Adjusted EBITDA on Q4 interest coverage by end of next week.

Healthcare Realty Trust Incorporated (HR) - Canvas Business Model: Revenue Streams

You're looking at the core engine of Healthcare Realty Trust Incorporated's (HR) cash flow, which is heavily weighted toward stable, long-term real estate contracts. This forms the bedrock of their revenue generation strategy.

The primary revenue driver is rental income from long-term leases. As of September 30, 2025, the Trailing Twelve Months (TTM) revenue stood at $1.18 billion. For that same third quarter ending September 30, 2025, the reported revenue was $297.77 million.

Operational efficiency directly impacts the net revenue realized. Healthcare Realty Trust Incorporated guides for the full year 2025 same-store cash Net Operating Income (NOI) growth to be between 4.00% and 4.75%. To be fair, the actual performance through the third quarter was even stronger, showing a 5.4% same-store cash NOI growth for the period ending September 30, 2025.

The company actively manages its asset base to recycle capital into higher-growth opportunities. Proceeds from asset dispositions year-to-date reached $500 million, achieved at a blended capitalization rate of 6.5%. This capital recycling is a key part of the revenue strategy, moving assets out at favorable pricing.

Here's a quick look at the key revenue-related metrics we see for 2025:

Beyond core rent and sales, Healthcare Realty Trust Incorporated is focused on unlocking value from its existing portfolio through active management. The expected incremental NOI from the Lease-Up and redevelopment projects is targeted up to $50 million over the next few years. This upside is broken down into specific areas of focus:

• Incremental NOI from redevelopments: approximately $25 million.
• Incremental NOI from the lease-up portfolio (non-redevelopment): approximately $25 million.
• Stabilized NOI expected from two specific projects (Fort Worth and Raleigh): approximately $8 million.
• Incremental NOI expected from five newly added redevelopment assets: nearly $8 million.

The company is also seeing strong underlying leasing performance supporting future revenue growth. For instance, third quarter lease executions totaled 1.6 million square feet. Also, health system leasing comprised nearly 50% of total activity for the quarter, up almost 20% from its low point in 2023.

Finance: draft 13-week cash view by Friday.