Healthcare Realty Trust Incorporated · NYSE:HR
Healthcare Realty Trust — Merger or Acquisition (June 2022)
33 slides from Healthcare Realty Trust's merger presentation, Jun 6, 2022
Slide 1: Strategic Business Combination
Strategic Business Combination Healthcare Realty and Healthcare Trust of America June 6, 2022
Slide 2: Property photos by city
Colorado Springs, Colorado Miami, Florida San Francisco, California Milwaukee, Wisconsin Chicago, Illinois
Slide 3: Transaction Overview
Transaction Overview Healthcare Realty and Healthcare Trust of America enter into a $17 billion strategic combination, creating a preeminent medical office building REIT T R ANSACTI ON • Combined company equity value of $11.2 billion and total enterprise value of $17.3 billion VA L UE • Share exchan
Slide 4: Transaction Sources and Uses
Transaction Sources and Uses JV AND ASSET SALES SOUR C ES ($ in Billions) CURRENT: PHASE 1 Equity exchange (1) $7.2 • Before or around closing HTA senior unsecured notes 2.6 • $1.6 billion of proceeds Joint venture / asset sale proceeds 1.6 • $1.1 billion of HTA special dividend New bank debt 0.7 •
Slide 5: Accretion Bridge
Accretion Bridge Using original transaction assumptions, Healthcare Realty anticipates achieving approximately 2.0% accretion on 2023 FAD per share. Excludes additional accretion potential from occupancy gains, rent growth, and accelerated external investment. HR 2023E FAD + HTA 2023E FAD - JV / ASS
Slide 6: Strategic Rationale
Strategic Rationale Creates preeminent MOB owner with enhanced scale, growth and financial benefits to drive shareholder value SCALE: • 727 properties, 44 million SF • 42 million SF of MOBs, 2x size of next largest MOB portfolio • ~60% of SF in 14 markets with 1M+ SF owned • ~80% of SF in 26 markets
Slide 7: Premier MOB REIT
Premier MOB REIT The preeminent MOB platform with national scale in dense, high growth markets and aligned with leading health systems TOTAL SF 42 Largest MOB Platform (1) Scale with Top (2) SQUARE FEET IN MILLIONS Health Systems (2) SQUARE FEET IN MILLIONS ON/ADJ SF 28 TOP 100 30 22 23 20 18 18 TOP
Slide 8: Sum of the Parts = Scale
Sum of the Parts = Scale Largest, high quality MOB portfolio positioned for future growth opportunities HR + HTA = NEW HR Equity Value(1) $4.6 $8.2 $11.6 SECTOR LEADING Enterprise Value(1) $6.4 $11.2 $17.6 PURE PLAY MOB REIT Square Feet (MOB) 17.1 24.6 41.7 # of MOB Properties 251 451 702 Occupancy
Slide 9: Portfolio Alignment
Portfolio Alignment HR expects to complete assets sales and joint ventures where it can realize the most value from its cluster strategy in target markets and also position New HR for optimal growth. INDICATIVE MOB ASSET JOINT PORTFOLIO NEW HR (1) SALES VENTURE CHARACTERISTICS Square Feet 41.7M 2.5M
Slide 10: Leading National Portfolio
Leading National Portfolio Portfolio focused in high density markets, with 75% of portfolio NOI located in coastal and sunbelt markets HTA HR >1,000,000 SF Pro Forma Coastal Density Markets Share of NOI (1) Coastal 26% Sunbelt 49% Other Top 100 MSAs(2) 21% Coastal Density TOTAL 96% Sunbelt Density F
Slide 11: Leading Market Scale
Leading Market Scale Largest publicly traded MOB owner in 12 of 14 markets with 1M+ SF owned and, on average, over 50% bigger than next largest competitor HR HTA New HR M il l ion s of S F 3.9 New HR # of Markets 2 2 9 MOB S F OW N ED 1.5M % of Total SF 21% 15% 41% # of Markets 4 7 14 1 . 0M + % of
Slide 12: Accelerated Growth
Accelerated Growth The strategic combination is expected to accelerate annual FAD per share growth by 100-200 basis points to 5-7%. 8% IN T ER N AL DR IVER S EXTERNAL DRIVERS 7% +30bps +30bps DIRECT SOURCING 6% +20bps RE/D EV ELOPEMN T +100bps RE N T G RO W T H ANNUAL FAD PER SHARE GROWTH 5% OCCUPAN
Slide 13: Internal Growth Drivers
Internal Growth Drivers Key operating metrics improve as HR reaches critical scale in attractive markets and operates more properties in clusters. # MARKETS / BUILDINGS / CLUSTERED % CASH LEASING ANNUAL RENT CLUSTERS / CLUSTERS OCCUPANCY (2) AND SIZE SPREADS (1) BUMPS (1) BUILDINGS PER MARKET c lust
Slide 14: External Growth Drivers
External Growth Drivers By clustering properties around hospital campuses, HR solves health system needs and accelerates per share growth. HEALTH SYSTEM NEEDS HR SOLUTION & VALUE SHAREHOLDER BENEFIT • Expand care footprint • Re/Development Occupancy gains • Patient experience • Relocation / expa
Slide 15: Expanded Relationships
Expanded Relationships Wider breadth of relationships with leading health systems drives future growth opportunities Top 100 Health Systems HR HTA New HR 34 + 46 57 Largest # of Top 100 Health System relationships Largest health system < 7% of NOI Select Top 100 Health Systems Source: HR and HTA Man
Slide 16: Targeted Growth
Targeted Growth In the past three years, HR has acquired an annual average of 1.5M SF across 18 markets. The HTA portfolio in these 18 markets is the equivalent of 7 years of work. 1,954 1,783 Square Feet in Thousands HR 2019-2021 Acq. 718 1,208 HTA Portfolio 708 1,335 885 923 882 574 409 122 263 37
Slide 17: Embedded Development Pipeline
Embedded Development Pipeline Value creation and future growth from combined $2B+ development pipeline at spreads of 100-200 basis points above acquisition yields Development Pipeline By Market $ in millions HR HTA HR HTA New HR Seattle $467 $0 $467 Houston 28 279 307 Denver 206 21 227 Dallas 89 107
Slide 18: Development projects by city
Atlanta, Georgia Future development Nashville, Tennessee Under construction Orlando, Florida Future development Houston, Texas Raleigh, North Carolina Under construction Under construction
Slide 19: Expanded Investment Activity
Expanded Investment Activity Annual investment volume expected to double over time from nearly twice as many health system relationships, hospital campuses, markets, and clusters. Net Investment Activity $ in Millions $2,000 ~$1.5B 1, 5 00 ACQUISITIONS IN NEW MARKETS AND EXPANDED RELATIONSHIPS 1 , 0
Slide 20: Scaled Platform
Scaled Platform Scaled platform results in elimination of $33-36 million of annual G&A costs and multiple revenue enhancing opportunities Expect to achieve 100% of G&A savings within 12 months G&A/EV for Healthcare REITs (1) Potential Incremental Future Revenue and Expense Benefits 62 bps 53 47 42 E
Slide 21: Flexible Balance Sheet
Flexible Balance Sheet(1) Strong financial profile, conservative leverage, and well-laddered debt maturities drive opportunity for improved cost of capital Pro Forma Capitalization (1) Pro Forma Debt Maturity Schedule $1,200 M Senior Notes Term Notes Mortgage Notes 30% 1,000 Debt 800 600 400 70 % Eq
Slide 22: Leadership Experience and Depth
Leadership Experience and Depth HR leadership team has an average HR tenure of 15.1 years. In the last five years, this team has completed $2.3 billion of investments and has executed 3,025 leases totaling 11.7 million square feet. Executives President & CEO 21 years CFO 19 years Leasing EVP, Invest
Slide 23: Valuation Potential
Valuation Potential Based on historical valuation ranges, New HR has the potential to reach attractive price levels before realizing the full growth potential of the combination with HTA. 30x NTM AFFO HR Price at AFFO Percentile Multiple of $1.485/share (1) 75th 23.3 $34.60 50th 21.9 $32.52 27.0x 25
Slide 24: Key Takeaways
Key Takeaways Shareholders in New HR will realize value through a lower risk profile, increased diversification, and accelerated growth. Preeminent, Scaled MOB Platform • 727 properties, 44 million SF • ~2X size of next largest MOB portfolio • ~60% of SF in 14 markets with 1M+ SF owned Expanded Rela
Slide 25: Property photos by city
Houston, Texas Denver, Colorado Chicago, Illinois Seattle, Washington Charlotte, North Carolina
Slide 26: Appendix
Appendix 26
Slide 27: Cluster Formation - Atlanta
Cluster Formation - Atlanta INVESTMENT PROGRESSION 2 01 7 2020 20 20 TODAY FUTURE Acquired three on Acquired two MOBs In coordination with Wellstar Current cluster size Embedded campus MOBs from adjacent to campus from Kennestone, acquired a 2.5 development • 357,360 SF developer two different owner
Slide 28: Cluster Formation - Denver
Cluster Formation - Denver INVESTMENT PROGRESSION 2 012 2015 20 1 7 20 1 8 TODAY FUTURE Developed two on Acquired one MOB Developed 3rd on Acquired three buildings Current cluster size Embedded campus MOBs adjacent to campus campus MOB on 15 acres of land for development • 539,082 SF future developm
Slide 29: Cluster Formation - Seattle
Cluster Formation - Seattle INVESTMENT PROGRESSION 2 01 6 2017 20 20 20 22 TODAY FUTURE Acquired two on Acquired one Developed one MOB Acquired one MOB Current cluster size Embedded campus MOBs, adjacent MOB on 4 on campus adjacent to campus development • 331,256 SF including one for acres of land p
Slide 30: Market Clustering Strategy - Seattle
Market Clustering Strategy - Seattle Healthcare Realty's Seattle portfolio of hospital-centric clusters represents the company's model for growth. INVESTMENT PROGRESSION 2008 2012 2016 2020 2022 N # of Buildings 2 6 15 27 28 Edmonds 4 properties H Square Feet 141.0K 379.3K 957.7K 1,545.5K 1,558.8K $
Slide 31: Health Systems - Top Markets
Health Systems - Top Markets New HR New HR % OF MOB ASSOCIATED % OF MOB TOP 20 MARKETS SQUARE FEET PORTFOLIO TOP 20 HEALTH SYSTEMS SQUARE FEET PORTFOLIO Dallas, TX 3,945 9.5% HCA (TN) 3,241 7.8% Houston, TX 2,433 5.8% Baylor Scott & White Health (TX) 3,152 7.6% Atlanta, GA 2,027 4.9% Tenet Healthcar
Slide 32: Forward-looking statements
This communication contains certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Healthcare Realty Trust Incorporated (“HR”) and Healthcare Trust of America, Inc. (“HTA”) intend s
Slide 33: Additional information and where to find it
THE SEC IN CONNECTION WITH THE PROPOSEDTRANSACTION, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT HR, HTA AND THE PROPOSED TRANSACTION. Investors and security holders may obtain copies of these documents free of charge through the website maintained by the SEC at
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