HEALTHCARE REALTY TRUST INCORPORATED 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2004


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 1-11852

HEALTHCARE REALTY TRUST INCORPORATED

(Exact name of Registrant as specified in its charter)


Maryland (State or other jurisdiction of incorporation or organization)		62 – 1507028 (I.R.S. Employer Identification No.)

3310 West End Avenue
Suite 700
Nashville, Tennessee 37203
(Address of principal executive offices)

(615) 269-8175
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

As of August 5, 2004, 47,665,758 shares of the Registrant’s Common Stock were outstanding.

Part I. FINANCIAL INFORMATION

Healthcare Realty Trust Incorporated

Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)


	June 30,			December 31,
	2004			2003
ASSETS
Real estate properties:
Land	$	141,166		$	139,732
Buildings, improvements and lease intangibles		1,582,644			1,405,426
Personal property		14,755			14,416
Construction in progress		28,221			13,198

		1,766,786			1,572,772
Less accumulated depreciation		(255,787	)		(232,763	)

Total real estate properties, net		1,510,999			1,340,009
Cash and cash equivalents		3,126			3,840
Mortgage notes receivable		81,911			91,835
Other assets, net		95,661			90,026

Total assets	$	1,691,697		$	1,525,710

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Notes and bonds payable	$	764,198		$	590,281
Accounts payable and accrued liabilities		20,231			15,649
Other liabilities		22,791			17,502

Total liabilities		807,220			623,432

Commitments		—			—
Stockholders’ equity:
Preferred stock, $.01 par value; 50,000,000 shares authorized; none issued and outstanding		0			0
Common stock, $.01 par value; 150,000,000 shares authorized; outstanding 43,065,185 –2004 and 42,823,916 – 2003		431			428
Additional paid-in capital		1,063,423			1,054,465
Deferred compensation		(24,162	)		(18,396	)
Cumulative net income		549,096			515,659
Cumulative dividends		(704,311	)		(649,878	)

Total stockholders’ equity		884,477			902,278

Total liabilities and stockholders’ equity	$	1,691,697		$	1,525,710

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in our Annual Report on Form
10-K for the year ended December 31, 2003, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated

Consolidated Statements of Income
For The Three Months Ended June 30, 2004 and 2003
(Dollars in thousands, except per share data)
(Unaudited)


	2004		2003
REVENUES:
Master lease rental income	$	22,710	$	21,970
Property operating income		28,392		21,385
Straight-line rent		308		572
Mortgage interest income		2,819		2,286
Interest and other income		1,054		762

		55,283		46,975
EXPENSES:
General and administrative		2,823		2,865
Property operating expenses		13,061		8,637
Interest		11,783		8,565
Depreciation		11,978		10,492
Amortization		13		13

		39,658		30,572

INCOME FROM CONTINUING OPERATIONS		15,625		16,403
DISCONTINUED OPERATIONS
Operating income from discontinued operations		0		1,439
Loss on sale of real estate properties		0		(208	)

		0		1,231

NET INCOME	$	15,625	$	17,634

BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations per common share	$	0.37	$	0.40

Discontinued operations per common share	$	0.00	$	0.03

Net income per common share	$	0.37	$	0.43

DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations per common share	$	0.37	$	0.39

Discontinued operations per common share	$	0.00	$	0.03

Net income per common share	$	0.37	$	0.42

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – BASIC		41,741,375		40,905,717

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – DILUTED		42,414,150		41,635,351

DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD	$	0.635	$	0.615

Healthcare Realty Trust Incorporated
Consolidated Statements of Income
For The Six Months Ended June 30, 2004 and 2003
(Dollars in thousands, except per share data)
(Unaudited)


	2004		2003
REVENUES:
Master lease rental income	$	45,720	$	44,310
Property operating income		53,157		41,186
Straight-line rent		490		1,191
Mortgage interest income		5,632		4,967
Interest and other income		1,948		2,342

		106,947		93,996
EXPENSES:
General and administrative		6,240		5,534
Property operating expenses		23,424		16,298
Interest		20,755		17,010
Depreciation		23,065		20,619
Amortization		26		27

		73,510		59,488

INCOME FROM CONTINUING OPERATIONS		33,437		34,508
DISCONTINUED OPERATIONS
Operating income from discontinued operations		0		1,903
Loss on sale of real estate properties		0		(208	)

		0		1,695

NET INCOME	$	33,437	$	36,203

BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations per common share	$	0.80	$	0.84

Discontinued operations per common share	$	0.00	$	0.05

Net income per common share	$	0.80	$	0.89

DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations per common share	$	0.79	$	0.83

Discontinued operations per common share	$	0.00	$	0.04

Net income per common share	$	0.79	$	0.87

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – BASIC		41,723,754		40,864,745

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – DILUTED		42,434,219		41,610,718

DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD	$	1.265	$	1.225

Healthcare Realty Trust Incorporated

Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2004 and 2003
(Dollars in thousands)
(Unaudited)


	2004			2003
Cash flows from operating activities:
Net income	$	33,437		$	36,203
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		24,662			21,207
Deferred compensation amortization		1,698			1,386
Increase in other liabilities		2,410			803
Increase in other assets		(7,269	)		(4,145	)
Increase in accounts payable and accrued liabilities		2,412			1,947
(Increase) decrease in straight line rent		122			(1,271	)
Loss on sale of real estate		567			208

Net cash provided by operating activities		58,039			56,338
Cash flows from investing activities:
Acquisition and development of real estate properties		(192,533	)		(21,864	)
Funding of mortgages		0			(22,527	)
Proceeds from sales of real estate		4,902			3,835
Proceeds from mortgage repayments		6,785			20,481

Net cash used in investing activities		(180,846	)		(20,075	)
Cash flows from financing activities:
Borrowings on notes and bonds payable		453,494			90,000
Repayments on notes and bonds payable		(275,928	)		(79,343	)
Dividends paid		(54,433	)		(51,467	)
Debt issuance costs		(2,537	)		0
Termination of interest rate swap		0			18,411
Common stock redemption		0			(10,902	)
Proceeds from issuance of common stock		1,497			903

Net cash provided by (used in) financing activities		122,093			(32,398	)

Increase (decrease) in cash and cash equivalents		(714	)		3,865
Cash and cash equivalents, beginning of period		3,840			402

Cash and cash equivalents, end of period	$	3,126		$	4,267

Healthcare Realty Trust
Incorporated

Notes to Consolidated Financial Statements

June 30, 2004

(Unaudited)

Note 1. Significant Accounting Policies

The accompanying unaudited consolidated financial statements and notes of Healthcare Realty Trust Incorporated (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements that are included in the Company’s Annual Report to Shareholders on Form 10-K for the year ended December 31, 2003. Management believes, however, that all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2004 due to many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effect of trends as discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

This interim financial information should be read in conjunction with the financial statements and MD&A included in the Company’s Annual Report to Shareholders on Form 10-K for the year ended December 31, 2003.

Stock Issued to Employees

The Company has elected to follow Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its equity-based awards to employees.

The following table represents the effect on net income and earnings per share for the three and six months ended June 30, 2004 and 2003 as if the Company had applied the fair value-based method and recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.”


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share data)	2004			2003			2004			2003
Net income, as reported	$	15,625		$	17,634		$	33,437		$	36,203
Compensation expense for equity-based awards to employees under the fair value method		(125	)		(3	)		(237	)		(225	)

Pro-forma net income	$	15,500		$	17,631		$	33,200		$	35,978
Earnings per share, as reported
Basic	$	0.37		$	0.43		$	0.80		$	0.89
Assuming dilution	$	0.37		$	0.42		$	0.79		$	0.87
Pro-forma earnings per share
Basic	$	0.37		$	0.43		$	0.80		$	0.88
Assuming dilution	$	0.37		$	0.42		$	0.78		$	0.86

During the three and six months ended June 30, 2004, the Company issued 1,050 and 188,921 shares of restricted stock to directors and employees, respectively, under its various benefit plans having a value of approximately $36,000 and $7.4 million, respectively. The shares have vesting periods ranging from three to 12 years.

Retirement Plans

The Company has retirement plans under which certain employees, as designated by the Compensation Committee of the Board of Directors, and the Company’s outside directors may receive retirement benefits. These benefits are described in more detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. The plans are unfunded and benefits will be paid from earnings of the Company. The following table sets forth the benefit obligation for the three and six months ended June 30, 2004 and 2003.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2004			2003			2004			2003
Benefit obligation, beginning of period	$	5,582		$	4,878		$	5,682		$	4,609
Service costs		122			105			244			209
Interest costs		89			71			178			141
Other		(10	)		7			(294	)		16
Actuarial gain (loss)		(28	)		84			(55	)		170

Benefit obligation, end of period		5,755			5,145			5,755			5,145
Unrecognized net actuarial gain		(632	)		(494	)		(632	)		(494	)

Net pension liability in accrued liabilities	$	5,123		$	4,651		$	5,123		$	4,651

Recent Accounting Pronouncements

In December 2003, the Financial Accounting Standards (“FASB”) issued FASB Interpretation No. 46, revised December 2003, (“FIN 46R”), “Consolidation of Variable Interest Entities”, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, accordingly, should consolidate the entity in its financial statements. FIN 46R replaces FASB Interpretation No. 46, “Consolidations of Variable Interest Entities”, which was issued in January 2003. Beginning in 2004, the Company was required to apply FIN 46R to variable interests in variable interest entities (“VIEs”) created after December 31, 2003. For variable interest in VIEs created before January 1, 2004, the Interpretation was applied beginning on January 1, 2004. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. The Company adopted FIN 46R to existing VIEs in which it has variable interests. The adoption of FIN 46R did not have an impact on the Company’s consolidated balance sheet.

Note 2. Properties

The Company invests in healthcare-related properties and mortgages located throughout the United States. The Company provides management, leasing and build-to-suit development services, and capital for the construction of new facilities as well as for the acquisition of existing properties. These activities constitute a single business segment as defined by the Financial Accounting Standards Board Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information.” As of June 30, 2004, the Company had investments in 237 properties and mortgages located in 32 states as follows:


	Number of Properties		Investments (in thousands)		Percent
Medical office/Outpatient facilities		145	$	1,166,564		63.1	%
Assisted living facilities		37		205,408		11.1	%
Skilled nursing facilities		36		199,881		10.8	%
Inpatient rehabilitation facilities		9		156,495		8.4	%
Independent living facilities		5		61,997		3.4	%
Other inpatient facilities		5		49,068		2.7	%
Corporate property		—		9,284		0.5	%

		237	$	1,848,697		100.0	%

Asset Acquisitions and Dispositions

During the first quarter of 2004, the Company invested $18.0 million in a 141,765 square foot medical office building on an Advocate Healthcare hospital campus in Illinois and invested $30.0 million in seven medical office buildings totaling 283,452 square feet on Ascension Health hospital campuses in Michigan and Arizona. The Company provides property management services on the buildings on Ascension Health campuses. These acquisitions were funded with proceeds from the Unsecured Credit Facility due 2006.

During the first quarter of 2004, the Company sold the annex portion of a physician clinic in Florida for $1.8 million, the Company’s basis in the property. In this transaction, the Company received $0.5 million in proceeds and funded a $1.3 million mortgage note.

During the second quarter of 2004, the Company acquired six medical office buildings located in Tennessee from affiliates of Ascension Health, Inc. for $70.8 million with an aggregate square footage of approximately 711,198. The Company also acquired four medical office buildings from affiliates of MedStar Health, two of which are located in Washington, D.C., and two of which are located in Maryland, for $41.3 million with an aggregate square footage of approximately 269,539. The Company provides property management services for these ten buildings. Finally, the Company acquired a 27,895 square foot assisted living facility in Florida for $4.8 million, and purchased land in Hawaii for $5.8 million for the construction of a medical office building.

During the second quarter of 2004, the Company sold a 25,000 square foot assisted living facility in Georgia for $4.5 million. (The Company has not accounted for this as discontinued operations because it was not considered material.) Also, two mortgage notes receivable totaling $6.4 million were repaid in full and a $4.7 million mortgage note on a skilled nursing facility in Tennessee was converted to an owned facility.

Other Developments

A number of the Company’s properties are subject to options in favor of the operator to repurchase the properties for the amount of the Company’s investment. Completion of the repurchase is contingent upon the operator having access to funding and certain other matters covered by the applicable contracts. The Company has in the past received notices of the exercise of such options where the repurchase did not occur. On June 24, 2004, the Company received notice from a senior living operator that it intends to exercise options to purchase the properties it leases from the Company. A closing of the proposed purchase of these properties would be contingent upon the operator’s ability to secure financing and the resolution of other matters. Therefore, the Company cannot express an opinion as to whether or not the proposed purchase might occur or when it might close. The properties covered by the purchase options exercised by this senior living operator comprise approximately $74.9 million of the Company’s assets and accounted for approximately 4% of the Company’s revenues on a consolidated basis for the six months ended June 30, 2004.

Note 3. Notes and Bonds Payable

Notes and bonds payable at June 30, 2004 consisted of the following (in thousands):


Unsecured Credit Facility due 2006	$	56,000
Senior Notes due 2006		49,700
Senior Notes due 2011, net		306,856
Senior Notes due 2014, net		298,524
Mortgage notes payable		51,951
Other note payable		1,167

	$	764,198

Unsecured Credit Facility due 2006

In October 2003, the Company replaced its existing $150.0 million credit facility with a new credit facility. The new $300.0 million credit facility (the “Unsecured Credit Facility due 2006”) was entered into with a syndicate of 12 banks and may be increased to $350.0 million during the first two years at the Company’s option subject to the availability of additional capital commitments; and the term may be extended one additional year. Rates for borrowings under the Unsecured Credit Facility due 2006 are, at the Company’s option, LIBOR based or based on the higher of the Federal Funds Rate plus 1/2 of 1% or the agent bank’s prime rate and can vary based on the Company’s debt rating. At June 30, 2004, the weighted average rate was 2.39%. In addition, the Company pays a facility fee of 0.35% on the commitment that may also fluctuate based on the Company’s debt rating. The Unsecured Credit Facility due 2006 contains certain representations, warranties, and financial and other covenants customary in such loan agreements. Subject to covenant restrictions, the Company had borrowing capacity remaining of $105.0 million under the facility at June 30, 2004. However, with the 4.6 million share equity issuances described in Note 6, and the resultant paydown of amounts outstanding under the Unsecured Credit Facility due 2006, the Company currently, under its financial covenants, has full borrowing capacity of $300.0 million on its Unsecured Credit Facility due 2006.

Senior Notes due 2006

In 2000, the Company privately placed $70.0 million of unsecured senior notes (the “Senior Notes due 2006”) with multiple purchasers affiliated with two institutions. The Senior Notes due 2006 bear interest at 9.49%, payable semi-annually, and mature on April 1, 2006. On March 31, 2004, the Company repaid $20.3 million of maturing principal and must repay $20.3 million of principal on April 1, 2005 with the remaining principal balance of $29.4 million payable upon maturity. The note agreements pertaining to the Senior Notes due 2006 contain certain representations, warranties and financial and other covenants customary in such loan agreements.

Senior Notes due 2011

In 2001, the Company publicly issued $300.0 million of unsecured senior notes due 2011 (the “Senior Notes due 2011”). The Senior Notes due 2011 bear interest at 8.125%, payable semi-annually on May 1 and November 1, and are due on May 1, 2011, unless redeemed earlier by the Company. The notes were originally issued at a discount of approximately $1.5 million, which yielded an 8.202% interest rate per annum upon issuance. In 2001, the Company entered into interest rate swap agreements for notional amounts totaling $125.0 million to offset changes in the fair value of $125.0 million of the notes. The Company paid interest at the equivalent rate of 1.99% over six-month LIBOR. In March 2003, the Company terminated these interest rate swap agreements and entered into new swaps under terms identical to those of the 2001 swap agreements except that the equivalent rate was adjusted to 4.12% over six month LIBOR. The Company received cash equal to the fair value of the terminated swaps of $18.4 million. The fair value of the terminated swaps is combined with the principal balance of the Senior Notes due 2011 on the Company’s consolidated balance sheet. The fair value gain of $18.4 million is being amortized against interest expense over the remaining term of the notes offsetting the increase in the spread over LIBOR. At June 30, 2004, the aggregate fair value of the current hedge, $8.1 million, is combined with the principal balance of the Senior Notes due 2011 with an offsetting increase to other liabilities on the Company’s consolidated balance sheet. The derivative instruments meet all requirements of a fair value hedge and have been accounted for using the “shortcut method” as set forth in Financial Accounting Standards Board Statement No. 133. As such, changes in fair value have had no impact on the Company’s consolidated income statement.

Senior Notes due 2014

On March 30, 2004, the Company publicly issued $300.0 million of unsecured senior notes due 2014 (the “Senior Notes due 2014”). The Senior Notes due 2014 bear interest at 5.125%, payable semi-annually on April 1 and October 1, and are due on April 1, 2014, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $1.5 million, yielding a 5.19% interest rate per annum.

Mortgage Notes Payable

At June 30, 2004, the Company had outstanding ten non-recourse mortgage notes payable, with the related collateral, as follows (dollars in millions):


											Investment in		Contractual
			Effective								Collateral at		Balance at
	Original		Interest			Maturity		Number of Notes			June 30,		June 30,
	Balance		Rate			Date		Payable		Collateral	2004		2004
Life Insurance Co.	$	23.3		7.765	%		7/26		1	Medical office building	$	45.3	$	21.4
Life Insurance Co.		4.7		7.765	%		1/17		1	Medical office building		11.0		3.7
Commercial Bank		35.0		7.220	%		5/11		8	Ten medical office buildings		79.7		26.9

									10		$	136.0	$	52.0

The $23.3 million note is payable in monthly installments of principal and interest based on a 30-year amortization with the final payment due in July 2026. The $4.7 million note is payable in monthly installments of principal and interest based on a 20-year amortization with the final payment due in January 2017. The eight notes totaling $35.0 million and the related collateral are held by special purpose entities whose sole members are wholly owned subsidiaries of the Company. These eight fully amortizing notes are payable in monthly installments of principal and interest and mature in May 2011. The contractual interest rates for the ten outstanding mortgage notes range from 7.22% to 8.50%.

Other Note Payable

In 1999, the Company entered into a $7.0 million note with a commercial bank. This note bears interest at 7.53%, is payable in equal semi-annual installments of principal and interest, and fully amortizes in July 2005.

The Company paid interest of $12.3 million and $17.1 million, respectively, for the three months ended June 30, 2004 and 2003, and $17.7 million and $19.3 million, respectively, for the six months ended June 30, 2004 and 2003. The Company capitalized interest of approximately $341,000 and $226,000, respectively, for the three months ended June 30, 2004 and 2003, and $593,000 and $387,000, respectively, for the six months ended June 30, 2004 and 2003.

Note 4. Commitments and Contingencies

Construction in Progress

Legal Proceedings

On October 9, 2003, HR Acquisition I Corporation (f/k/a Capstone Capital Corporation, “Capstone”), a wholly-owned affiliate of the Company, was served with the Third Amended Verified Complaint in a shareholder derivative suit which was originally filed on August 28, 2002 in the Jefferson County, Alabama Circuit Court by a shareholder of HealthSouth Corporation. The suit alleges that certain officers and directors of HealthSouth, who were also officers and directors of Capstone, sold real estate properties from HealthSouth to Capstone and then leased the properties back to HealthSouth at artificially high values, in violation of their fiduciary obligations to HealthSouth. The Company acquired Capstone in a merger transaction in October 1998. None of the Capstone officers and directors remained in their positions following the Company’s acquisition of Capstone. The complaint seeks an accounting and disgorgement of monies obtained by the allegedly wrongful conduct and other unspecified damages. The Company does not believe that these claims have merit and has filed a motion to dismiss the case asserting various defenses, including the statute of limitations.

The Company is not aware of any other pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s financial condition or results of operations.

Note 5. Net Income Per Share

The table below sets forth the computation of basic and diluted earnings per share as required by FASB Statement No. 128 “Earnings Per Share” for the three and six months ended June 30, 2004 and 2003 (dollars in thousands, except per share data).


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Weighted Average Shares
Weighted Average Shares Outstanding		43,048,851			42,024,071			43,005,762			41,983,099
Actual restricted stock shares		(1,307,476	)		(1,118,354	)		(1,282,008	)		(1,118,354	)

Weighted Average Shares – Basic		41,741,375			40,905,717			41,723,754			40,864,745

Weighted Average Shares – Basic		41,741,375			40,905,717			41,723,754			40,864,745
Dilutive effect of restricted stock shares		630,619			696,183			649,342			702,127
Dilutive effect of employee stock purchase plan		42,156			33,451			61,123			43,846

Weighted Average Shares – Diluted		42,414,150			41,635,351			42,434,219			41,610,718

Earnings per Common Share
Income from Continuing Operations	$	15,625		$	16,403		$	33,437		$	34,508
Discontinued operations		0			1,231			0			1,695

Net income	$	15,625		$	17,634		$	33,437		$	36,203

Basic Earnings per Common Share
Income from Continuing Operations per common share	$	0.37		$	0.40		$	0.80		$	0.84

Discontinued Operations per common share	$	0.00		$	0.03		$	0.00		$	0.05

Net income per common share	$	0.37		$	0.43		$	0.80		$	0.89

Diluted Earnings per Common Share
Income from Continuing Operations per common share	$	0.37		$	0.39		$	0.79		$	0.83

Discontinued Operations per common share	$	0.00		$	0.03		$	0.00		$	0.04

Net income per common share	$	0.37		$	0.42		$	0.79		$	0.87

Note 6. Stockholders’ Equity

At June 30, 2004, the Company had outstanding 43,065,185 shares of common stock. On July 28, 2004, the Company sold 4,000,000 shares of common stock, par value $0.01 per share, at $36.30 per share ($34.57 per share net of underwriting discounts and commissions) in an underwritten public offering. The Company received approximately $138.3 million in net proceeds from the offering. On August 5, 2004, the underwriters purchased 600,000 in additional shares to cover over-allotments generating approximately $20.7 million in additional net proceeds to the Company. The proceeds from the offering, including the over-allotment proceeds, were used to fund the acquisition of 20 buildings from Baylor Health Care System, to repay the outstanding balance on the Unsecured Credit Facility due 2006, and for general corporate purposes.

Note 7. Subsequent Events

Common Stock Dividend

On July 27, 2004, the Company’s Board of Directors declared an increase in its quarterly common stock dividend from $0.635 per share ($2.54 annualized) to $0.64 per share ($2.56 annualized) payable on September 2, 2004 to shareholders of record on August 16, 2004.

Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations

Overview

Healthcare Realty Trust Incorporated (the “Company”) operates under the Internal Revenue Code of 1986, as amended (the “Code”), as an indefinite life real estate investment trust (“REIT”). The Company, a self-managed and self-administered REIT, follows a general growth strategy that integrates owning, managing, and developing income-producing real estate properties and mortgages associated with the delivery of healthcare services throughout the United States. Management of Healthcare Realty Trust believes that by providing related real estate services, the Company can differentiate its competitive market position, expand its asset base and increase revenues.

Substantially all of the Company’s revenues are derived from rentals on its healthcare real estate properties and from interest earned on mortgage loans. Most of the Company’s leases and other financial support arrangements with respect to its healthcare real estate properties are designed to reduce the Company’s exposure to increased costs and expenses incurred from the operation of its healthcare properties. However, the Company is experiencing a trend in lease arrangements moving from net leases towards gross or modified gross leases, which could negatively impact the Company’s operating results.

Since the Company’s inception, it has been selective about its acquisitions of properties. Though the Company’s financial capacity typically allows it to take advantage of worthy investment opportunities as they arise, management believes that selecting long-term investments with leading healthcare providers will enhance the prospects for long-term stability and maintenance of the dividend. The Company’s diverse portfolio by facility type, state, occupant and type of agreement, helps mitigate its exposure to ever-changing economic conditions and other tenant, operator and occupant issues that arise from time to time. The Company has acquired approximately $297.9 million in properties during the first seven months of 2004.

Trends and Matters Impacting Operating Results

Management continuously monitors factors and trends important to the Company and REIT industry in order to gauge the potential impact on the operations of the Company. Discussed below and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 are some of the factors and trends management believes may impact future operations of the Company.

FAS 141,“Business Combinations”

Statement of Financial Accounting Standards 141, “Business Combinations” (“FAS 141”) requires that when a building is acquired with in-place leases, the cost of the acquisition be allocated between the real estate and the in-place leases based on relative fair value. The value of in-place leases is amortized, against rental income, over the average remaining term of the in-place leases upon acquisition, which is typically a significantly shorter period than the estimated life of the building. For the properties acquired since January 1, 2002, the amortization period of these in-place leases has ranged from 16 to 78 months. This in-place lease amortization, for a period of time, will result in lower rental income and net income and, depending on the circumstances, could substantially offset the increase to rental income and net income from the actual operating results of the acquired property. The amount of in-place lease amortization booked for the three and six months ended June 30, 2004 was $1.6 million and $2.2 million, respectively.

Interest expense

Proceeds from the issuance of the $300 million Senior Notes due 2014 were partially used to repay the outstanding balance on the Unsecured Credit Facility due 2006 of $220 million at the end of the first quarter of 2004 as well as to acquire properties. Although issued at a rate of 5.125%, the rate on the Senior Notes due 2014 has exceeded the rate on the Unsecured Credit Facility due 2006 by approximately 275 to 300 basis points during the second quarter resulting in much higher interest expense for the second quarter, dampening the accretiveness of the acquisitions in 2004.

Equity Offering

As described in Note 6 to the consolidated financial statements, the Company sold 4,600,000 shares of common stock in the third quarter 2004. The net proceeds of the offering were used to fund the acquisition of 20 buildings from Baylor Health Care System, to repay the outstanding balance on the Unsecured Credit Facility due 2006, and for general corporate purposes. On an earnings per share and FFO per share basis, these additional shares will have the effect of dampening the accretiveness of the acquisitions funded by the proceeds of the offering.

Funds From Operations

Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.”

FFO and FFO per share are the predominant measures used by the REIT industry and by analysts to evaluate equity REITs. As such, they are among the most important measures used by management. FFO does not, however, represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States, is not necessarily indicative of cash available to fund cash needs, and should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow as a measure of liquidity.

The table below sets forth computations of FFO and FFO per share for the three and six months ended June 30, 2004 and 2003 and reconciles FFO to net income. Included in real estate depreciation and amortization below for the three months ended June 30, 2004 and 2003 is approximately $1.3 million and $0, respectively, and approximately $1.8 million and $0, respectively, for the six months ended June 30, 2004 and 2003 in lease intangible amortization recorded as a reduction to rental income in the Company’s income statements.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2004		2003		2004		2003
Net income	$	15,625	$	17,634	$	33,437	$	36,203
Net loss on sales of real estate properties		567		208		567		208
Real estate depreciation and amortization		12,900		10,341		24,182		20,319

Total adjustments		13,467		10,549		24,749		20,527

Funds From Operations — Basic and Diluted	$	29,092	$	28,183	$	58,186	$	56,730

Funds From Operations Per Common Share – Basic	$	0.70	$	0.69	$	1.39	$	1.39

Funds From Operations Per Common Share – Diluted	$	0.69	$	0.68	$	1.37	$	1.36

Weighted Average Common Shares Outstanding – Basic		41,741,375		40,905,717		41,723,754		40,864,745

Weighted Average Common Shares Outstanding – Diluted		42,414,150		41,635,351		42,434,219		41,610,718

Results of Operations

Second Quarter 2004 Compared to Second Quarter 2003

Net income for the quarter ended June 30, 2004 totaled $15.6 million, or $0.37 per basic and diluted common share, on total revenues of $55.3 million. This compares with net income of $17.6 million, or $0.43 per basic common share ($0.42 per diluted common share), on total revenues of $47.0 million for the quarter ended June 30, 2003.

Total revenues for the quarter ended June 30, 2004 compared to the same period in 2003 increased $8.3 million or 17.7% due mainly to the acquisition of 29 properties during 2003 and 2004 (25 property-managed and four master-leased properties) and the commencement of operations of three properties that were previously under construction. Revenues for the quarter ended June 30, 2004 are reduced by non-cash amortization, totaling approximately $1.3 million, of lease intangibles related to the acquisitions.

Total expenses for the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003 increased $9.1 million or 29.7% mainly for the reasons discussed below:

• Property operating expenses increased $4.4 million or 51.2% due mainly to the acquisition of 25 property-managed buildings during 2003 and 2004 and the commencement of operations of three properties that were previously under construction.

• Interest expense increased $3.2 million or 37.6% due mainly to the issuance of the $300 million Senior Notes due 2014 in March 2004, offset by a reduction in interest expense due to the repayment in March 2004 of $20.3 million of the Senior Notes due 2006.

• Depreciation expense increased $1.5 million or 14.2% due mainly to the acquisition of 29 buildings during 2003 and 2004 and the commencement of operations of three properties that were previously under construction.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Net income for the six months ended June 30, 2004 totaled $33.4 million, or $0.80 per basic common share ($0.79 per diluted common share), on total revenues of $106.9 million. This compares with net income of $36.2 million, or $0.89 per basic common share ($0.87 per diluted common share), on total revenues of $94.0 million for the six months ended June 30, 2003.

Total revenues for the six months ended June 30, 2004 compared to the same period in 2003 increased $13.0 million or 13.8% due mainly to the acquisition of 29 properties during 2003 and 2004 (25 property-managed and four master-leased properties) and the commencement of operations of three properties that were previously under construction. Revenues for the six months ended June 30, 2004 are reduced by non-cash amortization, totaling approximately $1.8 million, of lease intangibles related to the acquisitions.

Total expenses for the six months ended June 30, 2004 compared to the six months ended June 30, 2003 increased $14.0 million or 23.6% mainly for the reasons discussed below:

• Property operating expenses increased $7.1 million or 43.7% due mainly to the acquisition of 25 property-managed buildings during 2003 and 2004 and the commencement of operations of three properties that were previously under construction.

• Interest expense increased $3.7 million or 22.0% due mainly to the issuance of the $300 million Senior Notes due 2014 in March 2004, higher interest rates on the two interest rate swaps entered

into in March 2003 than the interest rate swaps previously in place, reduced by the amortization of the $18.4 million fair value gain realized from the termination of the Company’s two interest rate swaps in March 2003. The increases were also partially offset by a reduction in interest expense due to the repayment in March 2004 of $20.3 million of the Senior Notes due 2006 and the repayment of three mortgage notes payable in October 2003.

• Depreciation expense increased $2.4 million or 11.9% due mainly to the acquisition of 29 buildings during 2003 and 2004 and the commencement of operations of three properties that were previously under construction.

Liquidity and Capital Resources

Debt Obligations

As discussed in more detail in Note 3 to the Consolidated Financial Statements, the Company is committed to pay interest and outstanding principal balances on its notes and bonds payable as follows:

Contractual

Balance at

Interest

(dollars in thousands)

6/30/04

Maturity Date

Rate at 6/30/04

Payments

Principal Payments

Unsecured Credit Facility due 2006

56,000

10/06

LIBOR + 1.10%

Quarterly

At maturity (1)

Senior Notes due 2006

49,700

4/06

9.49%

Semi-Annual

$20.3 million in 2005
and $29.4 million in 2006

Senior Notes due 2011, net

306,856

5/11

8.125%

Semi-Annual

At maturity

Senior Notes due 2014, net

298,524

4/14

5.125%

Semi-Annual

At maturity

Mortgage notes payable

51,951

5/11-7/26

7.22%-8.50%

Monthly

Monthly or at maturity

Other note payable

1,167

7/05

7.53%

Semi-Annual

764,198

(1) The Company pays a quarterly facility fee of 0.35% on the commitment that can change based on the Company’s credit rating.

As of June 30, 2004, 82% of the Company’s outstanding debt balances were due after 2008. The Company’s shareholders’ equity at June 30, 2004, totaled approximately $884.5 million and its debt to total capitalization ratio, on a book basis, was approximately 0.46 to 1. For the three months ended June 30, 2004, the Company’s earnings covered fixed charges at a ratio of 2.26 to 1.00. Subject to covenant restrictions, at June 30, 2004, the Company had borrowing capacity remaining of $105.0 million under the Unsecured Credit Facility due 2006. After giving effect to the 4.6 million share equity issuances described in Note 6, and the resultant paydown of amounts outstanding under the Unsecured Credit Facility due 2006, the Company’s debt to total capitalization ratio is approximately 41% and it currently, under its financial covenants, has full borrowing capacity of $300.0 million on its Unsecured Credit Facility due 2006.

The Company’s senior debt is rated Baa3, BBB-, and BBB by Moody’s Investors Service, Standard and Poor’s Investor Service, and Fitch Ratings, respectively.

At June 30, 2004, the Company was in compliance with the covenant requirements under its various debt instruments.

In 2001, the Company entered into interest rate swap agreements for notional amounts totaling $125.0 million to offset changes in the fair value of $125.0 million of the notes. The Company paid interest at the equivalent rate of 1.99% over six-month LIBOR. In March 2003, the Company terminated these interest rate swap agreements and entered into new swaps under terms identical to those of the 2001 swap agreements except that the equivalent rate was adjusted to 4.12% over six month LIBOR. The Company received cash equal to the fair value of the terminated swaps of $18.4 million. The fair value of the terminated swaps is combined with the principal balance of the Senior Notes due 2011 on the

Company’s balance sheet. The fair value gain of $18.4 million is being amortized against interest expense over the remaining term of the notes offsetting the increase in the spread over LIBOR. At June 30, 2004, the aggregate fair value of the current hedge, $8.1 million, is combined with the principal balance of the Senior Notes due 2011 with an offsetting increase to other liabilities on the Company’s consolidated balance sheet. The derivative instruments meet all requirements of a fair value hedge and have been accounted for using the “shortcut method” as set forth in Financial Accounting Standards Board Statement No. 133. As such, changes in fair value have had no impact on the Company’s consolidated income statement.

Shelf Registration

On March 30, 2004, the Company received $296.5 million in net proceeds from the issuance of the $300.0 million Senior Notes due 2014. In addition, the Company received $138.3 million in net proceeds from the issuance of the 4,000,000 shares of common stock on July 28, 2004, and received an additional $20.7 million in net proceeds from the issuance of 600,000 in shares of common stock on August 5, 2004 in connection with the underwriters’ over-allotment option. On July 22, 2004, the Company filed a post-effective amendment on Form S-3 pursuant to Rule 462(b) for an additional $28.5 million in order to register additional securities for its equity offering. These debt and equity transactions in 2004 reduced the remaining securities on the Company’s current effective registration statement to less than $5 million. The Company intends to file a universal shelf registration statement during the third quarter of 2004 to allow the Company to issue additional securities, should the market permit and the need arise. The Company may, under certain circumstances, borrow additional amounts in connection with the renovation or expansion of its properties, the acquisition or development of additional properties or, as necessary, to meet distribution requirements for REITs under the Internal Revenue Code. The Company may raise additional capital or make investments by issuing, in public or private transactions, its equity and debt securities, but the availability and terms of any such issuance will depend upon market and other conditions.

Security Deposits and Letters of Credit

As of June 30, 2004, the Company had approximately $8.3 million in letters of credit, security deposits, debt service reserves or capital replacement reserves. Generally, the Company may, at its discretion and upon notification to the operator or tenant, draw upon these instruments if there are any defaults under the leases or mortgage notes.

Asset Acquisitions and Dispositions

During the first quarter of 2004, the Company invested $18.0 million in a 141,765 square foot medical office building on an Advocate Healthcare hospital campus in Chicago, Illinois and invested $30.0 million in seven medical office buildings totaling 283,452 square feet on Ascension Health hospital campuses in Michigan and Arizona.

During the first quarter of 2004, the Company sold the annex portion of a physician clinic in Florida for $1.8 million. In this transaction, the Company received $0.5 million in proceeds and funded a $1.3 million mortgage note.

Also, during the second quarter, the Company acquired a 27,895 square foot assisted living facility in Florida for $4.8 million, and purchased land in Hawaii for $5.8 million for the construction of a medical office building.

On July 30, 2004, the Company acquired from Baylor Health Care System 20 medical office buildings in and around Dallas, Texas for $133.0 million with an aggregate square footage of approximately 1.1 million.

The Company funded these acquisitions from net proceeds from the issuance of the $300 million Senior Notes due 2014 and from the equity offering in the third quarter of 2004. The Company provides property management services for the Ascension Health, Medstar Health, and Baylor Health Care properties.

Other Developments

Investment Trends

The lower interest rate environment continues to create intense competition from highly leveraged financial intermediary property buyers. The Company believes that competition from such buyers will eventually subside as interest rates rise to historical levels. However, as growth in the Company’s top line revenues and growth in FFO are a direct reflection of the Company’s ability to make accretive new investments that outpace disposals and mortgage maturities and prepayments, the Company anticipates that growth in its FFO may be modest or could decline.

Commitments

As of June 30, 2004, the Company had a net investment of approximately $22.3 million in two build-to-suit developments in progress, which have funding commitments remaining totaling approximately $31.8 million and are estimated to be completed in late 2004 or early 2005. The Company also has an investment in a land parcel of $5.9 million. The Company anticipates it will construct a medical office building on the land for an aggregate investment of approximately $47 million. The Company intends to fund these commitments with internally generated cash flows, proceeds from the Unsecured Credit Facility due 2006, proceeds from sales of real estate properties, proceeds from repayments of mortgage notes receivable, or proceeds from capital market financing.

Dividends

On April 27, 2004, the Company’s Board of Directors declared an increase in its quarterly common stock dividend from $0.630 per share ($2.52 annualized) to $0.635 per share ($2.54 annualized) payable to stockholders of record on May 14, 2004. This dividend was paid on June 3, 2004. On July 27,

2004, the Company’s Board of Directors declared another increase in the quarterly common stock dividend to $0.64 per share ($2.56 annualized) payable to stockholders of record on August 16, 2004. This dividend is payable on September 2, 2004 and relates to the period April 1, 2004 through June 30, 2004. While the Company has no present plans to change its quarterly common stock dividend policy, the dividend policy is reviewed each quarter by the Company’s Board of Directors.

Liquidity

Historically, the terms of the leases and other financial support agreements the Company has relating to its properties obligate the tenants or sponsors to pay the operating expenses and taxes relating to the properties. As a result of these types of arrangements, the Company does not believe any increases in property operating expenses or taxes would significantly impact the Company’s operating results with respect to those properties during the respective terms of the agreements. However, as the Company continues to acquire more owned and managed properties, a greater percentage of its lease arrangements are gross or modified gross. As such, the Company’s operating results may be negatively impacted from increases in operating expenses on properties with those types of lease arrangements.

The Company plans to continue to meet its liquidity needs, including funding additional investments in 2004 and 2005, paying quarterly dividends, and funding debt service, from its cash flows, proceeds from the Unsecured Credit Facility due 2006, proceeds from additional repayments of mortgage notes receivable, proceeds from the sale of real estate investments, or additional capital market financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable or in sufficient amounts to meet its liquidity needs. See the Company’s Consolidated Statements of Cash Flows for further detail of the Company’s cash flows for the six months ended June 30, 2004.

Impact of Inflation

Inflation has not significantly affected the Company’s earnings due to the moderate inflation rate in recent years and the fact that many of the Company’s leases and financial support arrangements require tenants and sponsors to pay all or some portion of the increases in operating expenses, thereby reducing the risk of any adverse effects of inflation to the Company. In addition, inflation will have the effect of increasing gross revenue the Company is to receive under the terms of certain leases and financial support arrangements. Leases and financial support arrangements vary in the remaining terms of obligations from one to 18 years, further reducing the risk of any adverse effects of inflation to the Company. Interest payable under the interest rate swaps and the unsecured credit facilities is calculated at a variable rate; therefore, the amount of interest payable under the swaps and this debt will be influenced by changes in short-term rates, which tend to be sensitive to inflation. Generally, changes in inflation and interest rates tend to move in the same direction. During periods when interest rate increases outpace inflation, our operating results should be negatively impacted. Likewise, when increases in inflation outpace increases in interest rates, our operating results should be positively impacted.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Cautionary Language Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q and other materials the Company has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures which are “forward-looking statements.” Forward-looking statements include all statements

that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “anticipate” and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could significantly affect the Company’s current plans and expectations and future financial condition and results. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Shareholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports. For a detailed discussion of the Company’s risk factors, please refer to the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2003.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the three months ended June 30, 2004, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

There were no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect its internal controls over financial reporting during the period covered by this report. The Company, however, continues its process of assessing, improving and formalizing its system of internal controls and disclosure controls and procedures.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

The Company’s annual meeting of shareholders was held on May 11, 2004, and its shareholders voted on the election of Class II Directors as follows.

Marliese E. Mooney, Edwin B. Morris III, and John Knox Singleton were elected to serve as Class II directors until the annual meeting of shareholders in 2007 or until their respective successors are elected and qualified. The vote was as follows:


			Votes Cast
	Votes Cast		Against or
	in Favor		Withheld		Non Votes
Marliese E. Mooney		37,336,060		807,562		4,876,133
Edwin B. Morris III		37,519,903		623,719		4,876,133
John Knox Singleton		37,544,671		598,951		4,876,133

The following directors continued in office following the meeting:


	Term Expires
David R. Emery		2005
Batey M. Gresham, Jr.		2005
Dan S. Wilford		2005
Charles Raymond Fernandez, M.D.		2006
Errol L. Biggs, Ph. D.		2006

Item 5. Other Information

On July 27, 2004, the Company’s Board of Directors elected Bruce D. Sullivan as a Class 1 director of the Company to serve until the annual meeting of shareholders in 2005 or until his successor is elected and qualified. Mr. Sullivan will serve as Chairman of the Audit Committee and is an “audit committee

financial expert” (as defined in Item 401(h) of Regulation S-K of the Securities Act of 1933, as amended). Mr. Sullivan retired in 2001 as the managing partner of the Nashville, Tennessee office of Ernst & Young LLP.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 3.1 Second Articles of Amendment and Restatement of the Registrant (1)

Exhibit 3.2 Amended and Restated Bylaws of the Registrant (2)

Exhibit 4.1 Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

Exhibit 4.2 First Supplemental Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

Exhibit 4.3 Form of 8.125% Senior Note Due 2011 (3)

Exhibit 4.4 Second Supplemental Indenture, dated as of March 30, 2004, by the Company and Wachovia Bank, National Association (4)

Exhibit 4.5 Form of 5.125% Senior Note Due 2014 (4)

Exhibit 10.1 Underwriting Agreement, dated July 22, 2004, by and between the Company, Legg Mason Wood Walker, Incorporated, A.G. Edwards & Sons, Inc. and Wachovia Capital Markets, LLC (5)

Exhibit 31.1 Certification of the Chief Executive Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of the Chief Financial Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Filed as an exhibit to the Company’s Registration Statement on Form S-11 (Registration No. 33-60506) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.

(2) Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 1999 and hereby incorporated by reference.

(3) Filed as an exhibit to the Company’s Form 8-K filed May 17, 2001 and hereby incorporated by reference.

(4) Filed as an exhibit to the Company’s Form 8-K filed March 29, 2004 and hereby incorporated by reference.

(5) Filed as an exhibit to the Company’s Form 8-K filed July 27, 2004 and herby incorporated by reference

Exhibit Index


Exhibit		Description
Exhibit 3.1		Second Articles of Amendment and Restatement of the Registrant (1)

Exhibit 3.2		Amended and Restated Bylaws of the Registrant (2)

Exhibit 4.1		Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

Exhibit 4.2		First Supplemental Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

Exhibit 4.3		Form of 8.125% Senior Note Due 2011 (3)

Exhibit 4.4		Second Supplemental Indenture, dated as of March 30, 2004, by the Company and Wachovia Bank, National Association (4)

Exhibit 4.5		Form of 5.125% Senior Note Due 2014 (4)

Exhibit 10.1		Underwriting Agreement, dated July 22, 2004, by and between the Company, Legg Mason Wood Walker, Incorporated, A.G. Edwards & Sons, Inc. and Wachovia Capital Markets, LLC (5)

Exhibit 31.1		Certification of the Chief Executive Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2		Certification of the Chief Financial Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


Date of Earliest	Date Filed or
Event Reported	Furnished	Items Reported	Exhibits
April 27, 2004	April 30, 2004	Item 7. Financial Statements and Exhibits Item 9. Regulation FD Disclosure Item 12. Results of Operations and Financial Condition	Exhibit 99.1 First quarter dividend press release, dated April 27, 2004 Exhibit 99.2 First quarter earnings release, dated April 29, 2004 Exhibit 99.3 Supplemental Data Report, dated April 29, 2004, for the three months ended March 31, 2004


	HEALTHCARE REALTY TRUST INCORPORATED
	By:	/s/ Scott W. Holmes
		Scott W. Holmes
		Senior Vice President and Chief Financial Officer

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	Page
Part I — Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets		1
Consolidated Statements of Income		2
Consolidated Statements of Cash Flows		4
Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures about Market Risk		21
Item 4. Controls and Procedures		21
Part II — Other Information
Item 1. Legal Proceedings		22
Item 4. Submission of Matters to a Vote of Security Holders		22
Item 5. Other Information		22
Item 6. Exhibits and Reports on Form 8-K		23
Signature		25
EX-31.1 SECTION 302 CEO CERTIFICATION
EX-31.2 SECTION 302 CFO CERTIFICATION
EX-32 CEO AND CFO CERTIFICATION

(a)		Exhibits

		Exhibit 3.1 Second Articles of Amendment and Restatement of the Registrant (1)

		Exhibit 3.2 Amended and Restated Bylaws of the Registrant (2)

		Exhibit 4.1 Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

		Exhibit 4.2 First Supplemental Indenture, dated as of May 15, 2001, by the Company to First Union National Bank, as Trustee (3)

		Exhibit 4.3 Form of 8.125% Senior Note Due 2011 (3)

		Exhibit 4.4 Second Supplemental Indenture, dated as of March 30, 2004, by the Company and Wachovia Bank, National Association (4)

		Exhibit 4.5 Form of 5.125% Senior Note Due 2014 (4)

		Exhibit 10.1 Underwriting Agreement, dated July 22, 2004, by and between the Company, Legg Mason Wood Walker, Incorporated, A.G. Edwards & Sons, Inc. and Wachovia Capital Markets, LLC (5)

		Exhibit 31.1 Certification of the Chief Executive Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

		Exhibit 31.2 Certification of the Chief Financial Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

		Exhibit 32 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)		Filed as an exhibit to the Company’s Registration Statement on Form S-11 (Registration No. 33-60506) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.

(2)		Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 1999 and hereby incorporated by reference.

(3)		Filed as an exhibit to the Company’s Form 8-K filed May 17, 2001 and hereby incorporated by reference.

(4)		Filed as an exhibit to the Company’s Form 8-K filed March 29, 2004 and hereby incorporated by reference.

(5)		Filed as an exhibit to the Company’s Form 8-K filed July 27, 2004 and herby incorporated by reference