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: Healthcare Realty and Healthcare Trust of America Strategic Business Combination
Healthcare Realty and Healthcare Trust of America June 6, 2022 Strategic Business Combination
Slide 2: Colorado Springs, Colorado San Francisco, California Miami, Florida Chicago, IllinoisMilwaukee, Wisconsin
Colorado Springs, Colorado San Francisco, California Miami, Florida Chicago, IllinoisMilwaukee, Wisconsin
Slide 3: Transaction Overview
3 Transaction Overview • Led by Todd Meredith, President and CEO, and Kris Douglas, CFO • Operated under the Healthcare Realty (NYSE: HR) name • 13-member Board (9 from HR) led by HR Chairman, Knox Singleton MANAGEMENT & GOVERNANCE • $33-$36 million of total G&A savings and operational upside from s
Slide 4: Transaction Sources and Uses
4 Transaction Sources and Uses CURRENT: PHASE 1 • Before or around closing • $1.6 billion of proceeds • $1.1 billion of HTA special dividend • $500 million of excess proceeds - Growth capital - Opportunistic share repurchase SOURCES ($ in Billions) Equity exchange(1) $7.2 HTA senior unsecured notes
Slide 5: Accretion Bridge
5 Accretion Bridge (1) 2023 weighted average share count assumed to be approximately 159 million for HR Standalone and approximately 406 million for New HR, consistant with the proxy filed on May 2, 2022. (2) Based on $1.12 billion assumed proceeds for the special dividend. NOI loss on assets contri
Slide 6: Strategic Rationale
6 Creates preeminent MOB owner with enhanced scale, growth and financial benefits to drive shareholder value Strategic Rationale 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 marke
Slide 7: Largest MOB Platform with Scale in Dense, High Growth Markets
7 Population Density32) and Growth(3) 807K 496K 818K 630K 679K 5.0% 4.1% 5.3% 3.7% 4.7% 94 73 90 80 87 Exposure to Top 100 MSAs % OF GLA 42 15 22 18 23 New HR New HR New HR New HRDOC DOC DOC DOCWELL WELL WELL WELLVTR VTR VTR VTRPEAK PEAK PEAK PEAK 28 12 18 13 8 Premier MOB REIT Largest MOB Platform(
Slide 8: Sector Leading Pure Play MOB REIT
8 HR HTA NEW HR SECTOR LEADING PURE PLAY MOB REIT Equity Value(1) $4.6 $8.2 $11.6 Enterprise Value(1) $6.4 $11.2 $17.6 Square Feet (MOB) 17.1 24.6 41.7 # of MOB Properties 251 451 702 ENHANCED GROWTH AND SAFETY Occupancy 87.7% 87.5% 87.6% Wtd. Avg. Lease Term Remaining (WALTR) 3.9 5.3 4.7 % On/Adjac
Slide 9: Indicative MOB Portfolio Characteristics
9 INDICATIVE MOB PORTFOLIO CHARACTERISTICS NEW HR(1) ASSET SALES JOINT VENTURE Square Feet 41.7M 2.5M 1.0M % Off-Campus 32.7% 52.5% 33.4% % Single-Tenant 18.0% 48.1% 38.9% WALTR(2) 4.7 years 6.0 years 6.4 years 10-Mile Population Growth 5.0% 4.3% 4.7% Average Rent Growth(3) 2.7% 2.5% 2.8% Key Market
Slide 10: Leading National Portfolio in High Density Markets
10 Portfolio focused in high density markets, with 75% of portfolio NOI located in coastal and sunbelt markets Leading National Portfolio HTA HR >1,000,000 SF Pro Forma Sunbelt Density Coastal Density Coastal Density Markets Share of NOI (1) Coastal 26% Sunbelt 49% Other Top 100 MSAs(2) 21% TOTAL 96
Slide 11: Leading Market Scale
11 M O B S F O W N E D M O B S F O W N E D HR HTA New HR 1.5M # of Markets % of Total SF 2 21% 2 15% 9 41% 1 .0M+ # of Markets % of Total SF 4 34% 7 40% 14 58% 500K+ # of Markets % of Total SF 12 69% 18 74% 26 79% Leading Market Scale 3.9 2.4 2.0 1 .9 1 .9 1 .8 1 .8 1 .5 1 .5 1 .4 1 . 1 1 . 1 1 .0 1
Slide 12: Accelerated Growth
12 Accelerated Growth 0% 1% 2% 3% 4% 5% 6% 7% 8% 2019 4.4% 2020 4.4% 2021 4.7% 4.5% HR H ISTOR ICAL AVERAGE A N N U A L F A D P E R S H A R E G R O W T H The strategic combination is expected to accelerate annual FAD per share growth by 100-200 basis points to 5-7%. OCCUPANCY GAINS +100bps • HR – 87
Slide 13: Internal Growth Drivers
13 # MARKETS / CLUSTERS / BUILDINGS BUILDINGS / CLUSTERS PER MARKET CLUSTERED % AND SIZE CASH LEASING SPREADS (1) ANNUAL RENT BUMPS (1) OCCUPANCY (2) 5 markets(3) 24 clusters 96 buildings 19.2 buildings 4.8 clusters 13 markets(4) 8 clusters 34 buildings 2.6 buildings 0.6 clusters Internal Growth Dri
Slide 14: External Growth Drivers
14 External Growth Drivers By clustering properties around hospital campuses, HR solves health system needs and accelerates per share growth. (1) Includes 38 buildings for HR and 72 buildings for HTA (2) Based on estimated value of $400 per square foot and an average building size of 65,000 square f
Slide 15: Expanded Relationships
15 Expanded Relationships Source: HR and HTA Management HTAHR 34 + Top 100 Health Systems 46 Wider breadth of relationships with leading health systems drives future growth opportunities Select Top 100 Health Systems Largest # of Top 100 Health System relationships Largest health system < 7% of NOI
Slide 16: Targeted Growth
16 Source: HR and HTA Management Note: Ranked based on 2019-2021 acquisition volumes and HTA acquisition in square feet by market. 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. Targ
Slide 17: Embedded Development Pipeline
17 Source: HR and HTA Management Note: Ranked based on HR + HTA development pipeline size. HR HTA New HR Seattle $467 $0 $467 Houston 28 279 307 Denver 206 21 227 Dallas 89 107 196 Raleigh 101 89 190 Other 653 139 792 Total $1,544 $634 $2,179 Potential Annual Starts $250-350 Value creation and futur
Slide 18: Nashville, Tennessee Under construction Atlanta, Georgia Future development Orlando, Florida Future development Ralei…
Nashville, Tennessee Under construction Atlanta, Georgia Future development Orlando, Florida Future development Raleigh, North Carolina Under construction Houston, Texas Under construction
Slide 19: Expanded Investment Activity
19 Net Investment Activity BASELINE ACQUISITIONS Expanded Investment Activity 2018 2019 2020 2021 2022E Future Run-Rate $2,000 1 ,500 1 ,000 500 0 500 Annual investment volume expected to double over time from nearly twice as many health system relationships, hospital campuses, markets, and clusters
Slide 20: Scaled Platform G&A Savings
20 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 Scaled Platform G&A/EV for Healthcare REITs (1) DOC HR HTA(2) PEAK VTR New HR(3) WELL 62 bps 47 53 42 39 24 Enhanced Lea
Slide 21: Flexible Balance Sheet
21 Strong financial profile, conservative leverage, and well-laddered debt maturities drive opportunity for improved cost of capital Flexible Balance Sheet(1) $1,200M 1 ,000 800 600 400 200 0 Senior Notes Term Notes Mortgage Notes 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Pro Forma Debt Matu
Slide 22: Leadership Experience and Depth
22 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. Finance, Accounting, Human Resources, and Legal 194 Senior VPs 6
Slide 23: Valuation Potential
23 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. 15x 20x 25x 30x Source: S&P Capital IQ NTM: Next twelve months (1) AFFO of $1.485 per share based on expected
Slide 24: Key Takeaways
24 Shareholders in New HR will realize value through a lower risk profile, increased diversification, and accelerated growth. Key Takeaways Savings and Accelerated Growth • Accretive to 2023 FAD per share with full realization of G&A savings • Operational upside from near-term occupancy gains and hi
Slide 25: Denver, Colorado Seattle, Washington Chicago, Illinois Houston, Texas Charlotte, North Carolina
Denver, Colorado Seattle, Washington Chicago, Illinois Houston, Texas Charlotte, North Carolina
Slide 26: Appendix
26 Appendix
Slide 27: Cluster Formation - Atlanta
27 HR MOB & Future Development Cluster Formation - Atlanta H HTA PropertyHealthcare Realty Property Acquired three on campus MOBs from developer • 244,591 SF • $94.3M 2017 2020 Acquired two MOBs adjacent to campus from two different owners • 112,769 SF • $34.2M 2020 In coordination with Wellstar Ken
Slide 28: Cluster Formation - Denver
28 Cluster Formation - Denver Centura St. Anthony Campus HR MOB & Future DevelopmentHealthcare Realty Property H St. Anthony Hospital HR MOB & Future DevelopmentHealthcare Realty Property Developed two on campus MOBs • 186,672 SF • $50.3M 2012 2015 Acquired one MOB adjacent to campus • 47,508 SF • $
Slide 29: Cluster Formation - Seattle
29 Cluster Formation - Seattle H HR MOB & Future DevelopmentHealthcare Realty Property Acquired two on campus MOBs, including one for redevelopment • 134,099 SF • $77.9M 2016 2017 Acquired one adjacent MOB on 4 acres of land • 32,828 SF • $9.7M 2020 Developed one MOB on campus • 151,031 SF • $52.5M
Slide 30: Market Clustering Strategy - Seattle
30 N H H H H H H H H H H Edmonds Northgate Seattle Bellevue Kirkland Issaquah RentonBurien Tacoma 4 properties $50.2M investment 171k square feet 4 properties $124.6M investment 256k square feet 2 properties $65.2M investment 135k square feet 1 property $23.6M investment 36k square feet 3 properties
Slide 31: Health Systems - Top Markets
31 Health Systems - Top Markets TOP 20 HEALTH SYSTEMS ASSOCIATED SQUARE FEET % OF MOB PORTFOLIO HCA (TN) 3,241 7.8% Baylor Scott & White Health (TX) 3,152 7.6% Tenet Healthcare Corporation (TX) 2,539 6.1% CommonSpirit (IL) 2,539 6.1% Ascension Health (MO) 2,216 5.3% Indiana University Health (IN) 1,
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
Information as of December 31, 2021 unless otherwise disclosed 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 documen
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