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Industry Pulse: HTA outlines why it remains bullish on MOBs

Demographics, continued shift to outpatient care, to benefit the company

In its latest investor presentation – released last week – Scottsdale, Ariz.-based Healthcare Trust of America Inc. (NYSE: HTA) provides information as to why it, as the largest owner of medical office buildings (MOBs) in the country, remains so bullish on the property type. The investor presentation was part of an 8-K formed filed July 10.

In the long-term, HTA foresees a healthcare delivery landscape that is going to continue shifting to outpatient settings, where the company says providing care, procedures and surgeries are more cost-effective and are preferred by private and government insurance payers.

This shift to outpatient care is illustrated by data that HTA cites from the American Hospital Association, which notes that annual U.S. inpatient admissions have steadily dropped from about 145 per 1,000 people in 1990 to about 104 in 2014.

On the other hand, annual outpatient visits per 1,000 people has steadily increased during that same time, rising from about 1,100 in 1990 to nearly 2,100 in 2014.

HTA says that MOBs are the main beneficiaries of the rising number of outpatient visits, which should continue to increase as a result of overwhelming demographics. HTA notes that 10,000 people are turning 65 years old every day in the United States, and that people in that age cohort make four times as many doctor visits – mostly to MOBs – than the younger population.

As for younger people, they will continue to use outpatient facilities as well, as many millennials – who range in age from about 18 to 30 — are now forming families. As HTA notes, this, too, should add to healthcare volumes.

As health systems continue to merge as they have in recent years, they will need more outpatient space, which could benefit MOB firms such as HTA as well, the company explains.

As for HTA’s near-term strategy, the company says it is planning on 2 to 3 percent annual same-store growth by increasing revenue from improved lease rates, increasing the occupancy levels in its MOBs – its portfolio is currently 92 percent leased – and keeping tenant improvement (TI) costs low

The company also plans to tweak the composition of its 24 million square foot MOB portfolio, recycling assets that it owns in non-core markets and using those proceeds to either pay down debt or to acquire and/or develop assets in its core markets, where the company can achieve economies of scale by providing its own leasing and property and asset management services.

The company also believes that as it continues to grow its portfolio, especially in major metropolitan areas, it will become a “preferred landlord” in those markets because of its expertise, size and scale.

For a complete copy of the July 2018 HTA investor presentation, please click on this link for a web version: http://www.snl.com/Cache/c394159079.html. For a PDF version, please click here: http://ir.htareit.com/Cache/394159079.pdf

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