Healthcare Realty Trust Incorporated · NYSE:HR
Healthcare Realty Trust — Investor Presentation (September 2021)
31 slides from Healthcare Realty Trust's investor presentation, September 2021
Slide 1: Investor Presentation September 2021
lwvestor Fresentation September 2021 HEALTHCARE REALTY
Slide 2: Forward-looking statements
This presentation contains disclosures that are “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that do not relate solely to histori
Slide 3: The Big Picture
The Big Picture (1) $6.0 B 236 16.9M 95 % 86 % ENTERPRISE VALUE (2) PROPERTIES IN SQUARE FEET, 13.4M SF MEDICAL OFFICE AND ON/ADJACENT TO 24 STATES MANAGED INTERNALLY OUTPATIENT HOSPITAL CAMPUSES TOP MSAs MSA RANK SQ FT % of NOI Seattle 15 1,545,539 14.1% Dallas 4 2,306,357 12.1% Los Angeles 2 1,175
Slide 4: Health System Affiliations
Health System Affiliations 93% of Healthcare Realty's out- patient properties are associated with an investment-grade rated (Common Spirit) (Common Spirit) healthcare provider. (Ascension) Associated SF as a % of total SF HEA LT H SYST EM MOB/Outpatient RA N K (1) Top 25 53% (Common Spirit) (Ascensi
Slide 5: Portfolio History
Portfolio History $ 5, 0 0 0 2020 MEDICAL OFFICE BUILDING Formed JV SPECIALITY INPATIENT partnership with TIAA SENIOR HOUSING 4 ,50 0 OTHER/OFFICE 2017 Acquired WellStar 2011 Portfolio 4,000 Acquired Bon Secours Portfolio 2008 3,500 Acquired Atrium Health Portfolio 2007 Sold Senior Living Facilities
Slide 6: Industry Landscape
Industry Landscape $1.6 TRILLION OF HEALTHCARE REAL ESTATE VALUE A C UT E C A R E Hospitals AC UITY $642B IRF & LTCH O UT PA T I EN T C A R E $30B MOB/Outpatient $460B Skilled RE C O V E RY & RE H ABILIT AT IO N Nursing RE SID ENTIA L CARE $150B Senior Housing $300B SETTING Source: Revista, Green St
Slide 7: Who Owns MOBs?
Who Owns MOBs? % OF MOBS IN PORTFOLIO (1) 24 % 23% 38% 1% 93% 94% 9 4% 1% 40% 29% 71% 64% WELL V TR PEAK MPW HTA HR DOC NHI DHC CHCT UHT G MRE 95 73 60 % Multi-tenant Healthcare REITs without MOBs HTA HR DOC OH I CT R E SBRA LTC 86 % On or adjacent 57 49 to campus (2) HTA HR DOC 71k Avg building siz
Slide 8: MOB Market Focus
MOB Market Focus (1) (2) MARKET SUM M AR Y B Y C O M P A N Y # OF # OF AVG # OF AVG SF/ GEOGRAPHICALLY Geographically Isolated ISOLATED MARKETS MOBS MOBS/MARKET MARKET PROPERTIES (3) Properties (3 ) HR 36 235 6.5 458,779 5 45 PEAK 67 292 4.4 348,627 30 WELL 94 360 3.8 235,955 45 37 VTR 86 323 3.8 21
Slide 9: MOB Proximity to Hospital
MOB Proximity to Hospital (1) N- O O O CAM US N- S N- S P CAMPU CAMPU 0 0 0 - 2 S DS DS 25 1 50 YARD - 2 25 - 2 50 YAR 50 YAR S YA 25 LE 1 S RD ES 1 Y MI YA M IL E S - 0.25 MI L ARDS - 0.25 RDS - 0.25 OFF- OFF- OFF- CAMPUS CAMPUS CAMPUS HR HTA D OC SF % OF TOTAL SF % OF TOTAL SF % OF TOTAL On-campus
Slide 10: MOB Portfolio Comparison
MOB Portfolio Comparison % OF TOTAL MOB SF % On or Adjacent to Campus (1) 86 % Top 100 Health 84 86 80 Systems (2) (3) 72 73 63 62 58 61 57 56 54 54 52 51 49 48 NOT FOR PROFIT 46 39 34 32 37 27 ON CAMPUS HR PE A K W ELL VTR H TA DOC HR P E AK W E LL VTR HTA DOC Top 100 MSAs % 97 90 88 90 % 80 73 All
Slide 11: Off Campus Portfolio Comparison
Off Campus Portfolio Comparison (1) Sizable, dense and fast growing markets are critical when investing in off campus MOBs. 5.4% Demographic Strength Top Markets PROJECTED % (% of off-campus MOB SF) POPULATION 4.9% 4.5% GROWTH RATE 3.8% 100 89 91 909 3.8% 84 85 WTD. AVG. 10-MILE 4.0% 79 POPULATION 7
Slide 12: Size of MOB Market
Size of MOB Market Development projects, more so than acquisitions, foster hospital relationships. T O T A L O U T P A T I E NT / M O B M A R K E T A VER A GE A N N UA L S A L ES NEW DEVELOPMENT EACH Y EAR $460B $11B $9-12B Non-REITS $110B (24%) Investor- owned $170B (37%) REITS $60B (13%) T O P S E
Slide 13: Booming Demand
Booming Demand The aging population, health reform, A N N UA L PHYS I C I A N OF FICE VISITS & HEALTHCARE COSTS BY AG E and increased utilization are driving the volume of outpatient visits higher. 2.0 Visits 19.7% <45 $ $ $4,300 Annual Cost 17.7% P . % of GD 3.0 Visits xp 13.3% HC E 19.3% 45-64 $ $
Slide 14: Provider Trends
Provider Trends HOSPITALS' GROSS REVENUE PHYSICIAN COMPENSATION GROWTH 2009–2019 Inpatient vs. Outpatient 50% 40% 30% 28% 49% 20% 10% 1994 2018 0% 2009 2 0 19 EMPLOYMENT OF PHYSICIANS 60% Pediatrics 42% % O F H O S P I T AL EM PL OY ED PH Y SI C I AN S Internal Med. & Family Practice 35% 50% Cardiol
Slide 15: Rent Cushion
Rent Cushion MOB rent coverage provides a buffer against reimbursement changes. > 9X 9X >6X 3X 2.6X 1.3X COVERAGE RATIO 1.1X RENT CUSHION * RENT ( 1x) Assisted Living/ Skilled Nursing Facility Inpatient Rehab Facility Acute Care Hospital Surgical Hospital Medical Office Building Independent Living R
Slide 16: Intrinsic Real Estate Value vs. Leasehold Value
Intrinsic Real Estate Value vs. Leasehold Value Intrinsic Real Estate Value • Demand-driven • Low fungibility • Perpetual cash flow • Duration: infinite Multi-tenant building in dense location with strong demand. PRICE (RENT) S U P P L Y > D EMA N D DEMA N D > S U P P L Y Credit worthy single QUANTI
Slide 17: Tenant Diversity
Tenant Diversity HE ALTHCARE REALTY’S AVERAGE MULTI-TENANT LEASE SIZE = 4,072 S F 0-2,500 SF 2,501- 5,001- 7,501- 10,000+ SF 5,000 SF 7,500 SF 10,000 SF Mix of US Top Medical Tenant Specialties % of Healthcare Realty SQ FT (1) physicians (2) ON/ADJ OFF TOTAL % OF H R P ORTFOL IO 86% 14% 100% Healthc
Slide 18: Historical Investment Activity
Historical Investment Activity Net Investment Activity 2014-2020 Cumulative New Investments: $600M In each of the past two years, $2.1B Healthcare Realty's net investment 5 00 nearly doubled its historical average. ACQ 2M 20 UI S $ I T T N IO 4 00 10% E N PM $1, DEVELO $ 324M 883M 3 00 90% 200 $ 1 8
Slide 19: Development Pipeline
Development Pipeline $ in 000's E MB E D D E D P I P E L I NE # OF FORECASTED SF BUILDINGS BUDGET With a >$1.1B embedded re/development Wa s hi n g t o n 6 615,000 $396,350 pipeline, HR expects starts of $75M to $125M annually. C o lo r a do 8 508,000 210,050 C a li f o r n i a 4 190,000 125,200 N o
Slide 20: Acquisition Discipline
Acquisition Discipline Off-Campus On-Campus/Adjacent 2 02 0 A V A IL A B LE O F F E R I N G S 476 total offerings | 27.8M SF 379 offerings 97 offerings $6.4B $3.4B $16.9M $34.8M avg size avg size CO N F ID EN TIA L ITY AG R E E M E N T (CA ) Healthcare Realty maintains a disciplined focus on 43 eval
Slide 21: Recent MOB Acquisitions
Recent MOB Acquisitions (1) YEAR TO DATE Los Angeles $ 55.9 M , 1 3 1 , 0 0 0 S F Year to date, Healthcare Realty has acquired 21 buildings for $413M, all in existing markets. Saddleback Professional Center* & The Laguna* On AA- rated MemorialCare Health System's Saddleback Medical Center campus San
Slide 22: Healthcare Realty Cap Rates
Healthcare Realty Cap Rates JANUARY 1, 2019 - PRESENT Healthcare Realty’s cap rate spreads between on and off cam- pus investments range from 40 – 100 basis points, depending on the region, with an average spread of 61 basis points. W E ST CENTRAL EAST 5.2% 5.4% 5.6% O N / A DJ (1) 4.5 6.9 4.9 6.5 5
Slide 23: Cluster Strategy
Cluster Strategy SEATTLE/TACOMA OVERVIEW The Seattle portfolio rep- 27 properties resents Healthcare Realty’s 9 sub-markets N 10 hospital campuses model for growth 6 health systems Edmonds 4 properties H $665M total investment $49.2M investment 1.5M square feet 171k square feet Northgate Kirkland 63
Slide 24: Same Store Revenue Model
Same Store Revenue Model % OF AVG REVENUE 3.0% Turnover INDICATIVE SAME STORE NOI 3% GROWTH (1) Expiring Leases Base Revenue 3.00% Renewals (84.8% retention rate) (18%) Op. Expense Reimbursement 2.25% 15% Total Revenue 2.50% Operating Expenses 2.25% 1% No Increases >1 yr. term Net Operating Income +
Slide 25: Same Store Portfolio Trends
Same Store Portfolio Trends TE N A N T R E T E NT I O N OC C UPA N C Y Average: 85.1% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1(1) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1(1) Q2 2018 2019 2020 2021 2018 2019 2020 2021 AVER A G E IN - P L A CE CO NT R A CT U A L I NCREA S ES C A S H L EA S I N G SPREADS Q3 Q4 Q1 Q
Slide 26: Lease Maturities
Lease Maturities 23% 5.4% 5.4% 21% 19% 19% 19% WTD AVERAGE 18% 18% CASH LEASING SPREADS * 4.1% % OF L E A S E D S F 16% 16% 3.8% 15% 3.8% 15% 14% 3.3% 3.4% 2.3% 1.8% 1.0% 2 0 12 2 013 2 014 2 015 2 016 2 017 20 1 8 2019 2020 2 0 2 1 (2) 2 0 2 2 2023 SF E X P IR A T IO NS ( 0 0 0 s ) 1,345 1,436 1,86
Slide 27: Cash Leasing Spread Distribution
Cash Leasing Spread Distribution DISTRIBUTION 2012 2020 WTD AVG WTD AVG 1.0% 4.1% 60 % 50% 40 % 30% 12 20 20% 20 20 20 20 10% 12 20 CASH LEASING 0% SPREAD <0% 0% 1% 2% 3% 4% 5% 6% >6% 2 020 1 4% 12% 46% 28% 2 012 22 % 44 % 22% 12 % 27
Slide 28: MOB Fungibility Metrics
MOB Fungibility Metrics SCORE 8-10 Before acquiring or developing a building, LOW FUNGIBILITY HR assigns each property a fungibility Larger, denser markets score. A building with low fungibility (high score) has unique qualities that are not Top hospital affiliation CASH readily substituted. On camp
Slide 29: HR MOB Portfolio Evolution
HR MOB Portfolio Evolution SF CH A NGE 2 007 20 13 2020 ( 2 007 -2 02 0) 10 5.2% 7.8% 6.1% + 497K 9 23.5% 24.2% 21.6% + 1.3M 8 17.7% 25.0% 37.3% + 4.3M WTD AVG WTD AVG 7.7 7 9.0% 10.6% 7.3 18.0% + 2.0M FUNGIBILITY SCORE WTD AVG 6.6 6 11.2% 14.3% 10.7% + 674K 5 10.0% 7.3% 4.5% - 201K 4 10.7% 6.2% 0.8
Slide 30: Capital Stack and Maturities
Capital Stack and Maturities $13M $700M Revolver due May 2023 1.00% (1) 12 months $200M DEBT METRICS ended 6/30/21 $200M Term Loan due May 2024 1.95% (2) Fixed Charge Coverage Ratio 4.8x $150M Debt Service Coverage (7) 5.5x $150M Term Loan due June 2026 2.48% (3) Net Debt to Adjusted EBITDA (8) 5.1x
Slide 31: Healthcare Realty
Healthcare Realty Healthcare Realty Trust is a real estate investment trust that integrates owning, managing, financing and developing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of June 30, 2021, the Company was in
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