Healthcare Realty Trust Incorporated · NYSE:HR
Healthcare Realty Trust — Healthcare Trust of America — Investor Presentation (February 2019)
30 slides from Healthcare Realty Trust's investor presentation, Feb 15, 2019
Slide 1: The Largest Dedicated Owner & Operator of Medical Office Buildings in the U.S.
HEALTHCARE TRUST OF AMERICA, INC. The Largest Dedicated Owner & Operator of Medical Office Buildings in the U.S. FEBRUARY 2019 670 Albany, Boston MA Owned and Operated by HTA
Slide 2: Forward Looking Statements
F O R W A R D L O O K I N G S T A T E M E N T S This document contains both historical and forward‐looking statements. Forward‐looking statements are based on current expectations, plans, estimates, assumptions and beliefs, including expectations, plans, estimates, assumptions and beliefs about our
Slide 3: Why Medical Office Buildings?
WHY MEDICAL OFFICE BUILDINGS? Webb Medical Plaza B |Phoenix, AZ Owned and Operated by HTA 3
Slide 4: The Medical Office Building Thesis
THE MEDICAL OFFICE BUILDING THESIS WHY HEALTHCARE? 5% 11% • Healthcare is the fastest growing sector in dollars and in employment within the US. 19% • Aging demographics boost healthcare spending: 10,000 people turning 65 every day (4x as many physician visits as younger population). • Healthcare is
Slide 5: MOB Acquisition Market Dynamics
MOB ACQUISITION MARKET MARKET Medical Office Building Cap Rates DYNAMICS CAP RATES REMAIN LOW Despite a 50-100bps increase in 10% interest rates, cap rates have remained at historic lows given significant private 9% investor demand. 8% MIXED QUALITY TRANSACTIONS 7% 2019 transactions have been more m
Slide 6: The HTA Difference
THE HTA DIFFERENCE The Pavilion MOB |Dallas, TX Owned and Operated by HTA 6
Slide 7: HTA Is the Largest Dedicated Owner & Operator of MOBs in the U.S.
HTA IS THE LARGEST DEDICATED OWNER & OPERATOR OF MEDICAL OFFICE BUILDINGS IN THE U.S. CORE, CRITICAL MEDICAL REAL ESTATE DISCIPLINED, ACCRETIVE GROWTH STRATEGY • On-campus and core community off-campus focus within high • Disciplined record of acquiring and developing MOBs with demand medical hubs f
Slide 8: Company Snapshot
COMPANY SNAPSHOT $6.8B 23M+ SF 156% BBB / Baa2 GROSS INVESTMENTS LARGEST ON-CAMPUS OWNER TOTAL SHAREHOLDER RETURNS INVESTMENT GRADE BALANCE SHEET Since December 2006* ONLY VERTICALLY INTEGRATED OPERATING PLATFORM IN MEDICAL OFFICE Premiere Gateway Cities – Top 10 Core-Critical Real Estate Portfolio
Slide 9: Creating the Superior Platform
CREATING THE SUPERIOR PLATFORM 2013 2018 Portfolio Size ($B) $3.0B $6.8 B Portfolio Size 14.1MM SF 23.2MM SF (GLA in millions) Top Markets Phoenix Dallas IN THE LAST 5 YEARS, WE Pittsburg Houston Greenville Boston Albany Tampa HAVE GROWN OUR Indianapolis Atlanta PORTFOLIO & EARNINGS % Top 20 Markets
Slide 10: HTA – Largest Medical Office REIT
HTA – LARGEST MEDICAL OFFICE REIT 25.0 20.0 15.0 10.0 5.0 0.0 HTA WELL VTR HCP HR DOC MOB GLA 21.8 20.9 19.6 19.2 13.0 12.9 MOBs On-Campus / Aligned (%) 96% 92% 95% 82% 88% 89% Dallas Dallas Los Angeles Houston Dallas Atlanta Houston Houston Chicago Dallas Seattle Minneapolis Boston Los Angeles Indi
Slide 11: Strong Performance Among Peers
STRONG PERFORMANCE AMONG PEERS Strong Same Store Growth Efficient Capital Allocation Drives Returns Avg. SS Growth Since 2013 Cap-Ex as % of NOI Since 2013 3.5% 3.2% 3.0% 35% 31% 3.0% 2.6% 30% 2.3% 2.5% 25% 22% 2.0% 20% 1.5% 1.3% 1.5% 15% 13% 1.0% 10% 0.5% 5% 0.0% 0% HTA VTR WELL HCP DOC HR HTA HR O
Slide 12: 2018 – Integrating the Platform & Increasing Dry Powder
2018 – INTEGRATING THE PLATFORM & INCREASING DRY POWDER Same Store Growth + 2.5% • Base revenue growth – 2.2% driving performance. • Leasing strong – Increasing leasing spreads to 2.6% FY and 4.4% in 4Q. Retention of 81% FY. • Expense savings – Bundling & using scale to drive base margin expansion o
Slide 13: 2019 – Disciplined Execution, Patiently Looking for Opportunities
2019 – DISCIPLINED EXECUTION, PATIENTLY LOOKING FOR OPPORTUNITIES Same Store Growth Above Peer Average • Expected range 2.0 to 3.0% • Focused leasing performance: (i) releasing spreads > 2%; (ii) annual escalators > 2.5%; (iii) retention of 80%+ • Platform driving margin growth: 25bps of base margin
Slide 14: Medium Term Annual Shareholder Return Potential
8.7% MEDIUM TERM ANNUAL SHAREHOLDER RETURN POTENTIAL SHAREHOLDER RETURN COMPONENTS MEDIUM TERM POTENTIAL: ~8 TO 12% Operating Assumption FFO Impact Dividend Yield Reliable 4.35% Same Store Revenue Growth 2-3% base revenue 3.0% Same Store Expense Savings 25bps Margin expansion 1.0% Occupancy Improvem
Slide 15: The Leading MOB Operator
THE LEADING MOB OPERATOR Lincoln Medical Center |Parker, CO Owned and Operated by HTA 15
Slide 16: Our Portfolio: Critical Mass in Key Gateway Markets
OUR PORTFOLIO CRITICAL MASS IN KEY GATEWAY MARKETS HTA MARKET CRITERIA HIGH GROWTH MARKETS WITH DENSE PATIENT BASE Location, Location, Location. 93% of our GLA located is in the top 75 MSAs, most with strong academic university concentration. ON CAMPUS & COMMUNITY CORE OFF CAMPUS We target 68% on-ca
Slide 17: Health System Diversification
HEALTH SYSTEM DIVERSIFICATION NO MORE THAN 4.4% of ABR WITH ANY ONE TENANT HEALTH SYSTEM OUR PARTNERS ARE THE TOP HEALTH SYSTEMS IN THE US UNDERWRITING • HTA monitors hospital campuses and performance using proprietary financial analysis, performance metrics, and on-the ground reporting from its loc
Slide 18: HTA - Lease Expirations
HTA - LEASE EXPIRATIONS Lease Expiration Schedule as % of Portfolio ABR (as of 4Q 18) 16% 14.7% 14% 13.0% 11.3% 12% 10.6% 9.9% 10% 9.1% 8.1% 8% 6.0% • Portfolio Leased 5.3% 5.1% 6% 4.3% Rate (4Q 18): 4% 2.6% 92.0% 2% 0% • Weighted Average Lease Term Remaining: 5.6 years % of Area Represented by Expi
Slide 19: Health System Consolidation Case Study - Park Plaza Hospital
HEALTH SYSTEM CONSOLIDATION CASE STUDY - PARK PLAZA HOSPITAL HTA’s KEY MARKET FOCUSED PORTFOLIO HAS EXPERIENCED Houston, TX CREDIT UPGRADES AS DOMINANT HEALTH SYSTEMS ACQUIRE KEY HOSPITALS FROM WEAKER PARENT COMPANIES 1200 Binz| Houston, TX Owned and Operated by HTA • Health systems across the U.S.
Slide 20: What Is a Platform?
WHAT IS A PLATFORM? At HTA, it’s everything. Our platform consists of four unique parts of our business, each saving us money and generating shareholder value. Our efficiencies allow us to run 25-50 bps more accretive than our peers. PROPERTY MANAGEMENT TENANT SATISFACTION & PROFITABILITY MAINTENANC
Slide 21: Platform Has Produced Favorable Operating Results
PLATFORM HAS PRODUCED FAVORABLE OPERATING RESULTS SS EXPENSE TREND VS PEERS In 2017 / 2018, our team has successfully integrated the $2.8B / 6MM SF in assets acquired in 2017 onto HTA’s property management & leasing platform. Key achievements included: SS Expense Growth YoY (Avg. Since 2014) • Achie
Slide 22: Platform Has Produced Favorable Operating Results: Leasing
PLATFORM HAS PRODUCED FAVORABLE OPERATING RESULTS INCREASING LEASING SPREADS LEASING COST COMPARISON Positive Re-leasing Trends Significant Leasing Cost Savings 14.0 5.0% 4.4% 12.2 12.0 4.0% 3.7% 10.0 9.0 3.0% 2.6% 2.7% 2.2% 1.9% 8.0 2.0% 1.6% 1.7% 1.2% 5.8 1.1% 6.0 5.1 1.0% 4.7 4.5 4.4 0.0% 4.0 3.4
Slide 23: External Growth Opportunities
EXTERNAL GROWTH OPPORTUNITIES Lake Norman MOB |Charlotte, SC Owned and Operated by HTA 23
Slide 24: Proven History Investing in Competitive Markets
PROVEN HISTORY INVESTING IN COMPETITIVE MARKETS LARGE, FRAGMENTED INDUSTRY WITH HISTORY OF TARGETED ACQUISITIONS AMPLE INVESTMENT OPPORTUNITIES (AS OF DECEMBER 31, 2018) 5% 11% 19% REITS Hospitals / Health Systems Providers / Private Owners Private Equity / Developers 14% Govt / Other 51% $ millions
Slide 25: Development Platform Case Study - Drives Accretive Growth
DEVELOPMENT PLATFORM CASE STUDY- DRIVES ACCRETIVE GROWTH WAKEMED WakeMed Park of Cary |Raleigh, NC Owned and Operated by HTA EXISTING REPUTABLE DEVELOPMENT PLATFORM ENHANCES GROWTH POTENTIAL AND RELATIONSHIPS In 2Q18, HTA entered into a development agreement with WITH KEY TENANTS WakeMed, a leading
Slide 26: Accretive Capital Recycling Case Study - Greenville MOB Sale
ACCRETIVE CAPITAL RECYCLING CASE STUDY - GREENVILLE MOB SALE Greenville MOB|Greenville, SC Owned and Operated by HTA HTA IS TAKING ADVANTAGE OF CURRENT MARKET PRICING TO RECYCLE NON-CORE ASSETS AT PRICING THAT ALLOWS FOR ACCRETIVE PURCHASES IN KEY MARKETS In 3Q18, HTA sold its Greenville, SC medical
Slide 27: Performance to the Bottom Line
PERFORMANCE TO THE BOTTOM LINE Cherokee Medical Center |Woodstock, GA Owned and Operated by HTA 27
Slide 28: Financial Performance to Bottom Line
FINANCIAL PERFORMANCE TO BOTTOM LINE INCREASING NORMALIZED FFO/ SHARE CONSISTENT SAME STORE GROWTH – 3.0% SINCE LISTING 3.0% HTA Avg. 2.6% REIT MOB Avg. * HTA DATA AS OF 12/31/18 28
Slide 29: Fortress Balance Sheet
FORTRESS BALANCE SHEET DEBT / TOTAL CAPITALIZATION WELL-LADDERED DEBT CAPITALIZATION WITH LIMITED NEAR-TERM MATURITIES 48.0% 44.0% 40.0% 36.0% 33.1% 33.0% 31.4% 31.9% 31.8% 31.3% 32.0% 30.0% 29.4% 30.4% 29.9% 29.7% 28.3% 28.0% 26.2%26.4% 24.0% 20.0% 16.0% 12.0% Long Term Leverage Target of < 6.0X Ne
Slide 30: Thank You
THANK YOU CHECK US OUT @ WWW.HTAREIT.COM Mission Tower, Orange County / Los Angeles, CA 30 Owned and Operated by HTA
Healthcare Trust of America — Investor Presentation (February 2019) on 6ix