REIT Report: HTA’s 2017 was a memorable one

The REIT made $2.73 billion of investments to become the largest MOB owner

By John B. Mugford

Even though plenty was written about Scottsdale, Ariz.-based Healthcare Trust of America Inc. (NYSE: HTA) during 2017, the year that the publicly traded real estate investment trust (REIT) had deserves plenty of attention.

In announcing its full-year 2017 activity, HTA in January said it invested $2.73 billion in acquiring 6.8 million square feet of medical office building (MOB) space last year. The company also did something else it typically does not do: it completed three in-process developments that it acquired from Duke Realty Corp. (NYSE: DRE) during the year.

Of course, a large share of HTA’s investment activity in 2017 came by way of its blockbuster, $2.25 billion acquisition of most of the MOBs, about 70 facilities, owned by Duke Realty, which effectively exited the healthcare real estate (HRE) space.

As far as HTA is concerned, the Duke Realty portfolio was not just a way to add scale, as officials note that the portfolio, as well as the other properties it acquired, were a good strategic fit for its existing portfolio.

A big part of HTA’s acquisition strategy is to add properties in markets where it already has significant scale. Ninety percent of the MOBs it acquired in 2017 are in its “existing key markets,” allowing HTA to generate synergies in its existing property management, building services and leasing platforms.

In addition, HTA, which still prefers on-campus MOBs, says that about 76 percent of the facilities it acquired in 2017 are located on or adjacent to hospital campuses. About 70 percent of its overall portfolio is on or adjacent to hospitals.

Since its founding as a non-traded REIT in 2006, HTA has invested about $7 billion in healthcare facilities. It says it now owns the largest MOB portfolio, with 24 million square feet. About 80 percent of its square footage is in what HTA calls its 20 to 25 “key gateway” markets. In 16 of those markets, HTA owns portfolios topping 500,000 square feet.

The company wasn’t just a buyer in 2017, as it also disposed of a number of “noncore” assets for a total of $85.2 million at an “effective” capitalization (cap) rate of 5.8 percent, based on the expected forward net operating income (NOI).

“We begin 2018 in the best strategic position in HTA’s history, as the most relevant provider of medical office buildings; the most cost-effective and convenient location for healthcare delivery going forward,” said Scott D. Peters, HTA’s chairman and CEO. “2017 was a transformative year…”

Disclaimer: The author has no financial position in the companies mentioned and this article does not constitute an investment recommendation.

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