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HTA offers stability amidst a challenged landscape for REITs
admin | April 30, 2021
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
As the REITs begin reporting their first quarter earnings results, the pandemic-related challenges present across each of the various subgroups continue to impact key operating metrics. There is relative stability offered by medical office buildings (MOBs) versus other property types held by the broader healthcare REITs, and the largest operator of these properties – Healthcare Trust of America (HTA). Although HTA does not report 1Q21 results until May 7, investors should anticipate a continuation of stable cash flows, high percentage of rent collections, and a high relative occupancy to the rest of the healthcare REIT peer group.
Exhibit 1. HTA vs Healthcare REITs – Although spreads are optically tight, HTA presents a defensive opportunity amidst a challenged landscape for the broader REIT sector
Source: Bloomberg/TRACE – BVAL Indications Only
Bond recommendation
HTA 3.5% 8/1/26 @ +50/5YR; G+48; 1.37%; $110.28
Issuer: Healthcare Trust of America Holdings LP (HTA)
CUSIP: 42225UAD6
Amount outstanding: $600 million
Senior debt rating: Baa2/BBB
Global Deal
Market analysis
- HTA is the nation’s largest operator of medical office buildings (MOBs), which represent roughly 95% of the properties in its portfolio. The company reported $5.7 billion in net real estate property as of year-end 2020, with $7.5 billion in gross investments. At year-end HTA had 469 properties representing over 25 million square feet of commercial space.
- The company is extremely well-diversified geographically and by tenant. No single tenant represents more than 4% of rents. The company operates predominantly in metropolitan areas, spread out across over 30 states in the Southwest, Southeast, Northeast and Midwest. No single market represents more than 10% of total rents. Approximately two thirds of its properties are located on a hospital or medical center campus. HTA’s top 3 markets are Dallas, Houston and Boston.
- HTA’s occupancy rate stood at 89.1% as of year-end 2020, down only marginally from 89.9% at the prior year-end. For full-year 2020, the company collected 99% of total monthly rents, which includes the impact of deferred charges. By comparison, peers such as Welltower (WELL: Baa1/BBB+) with larger components of senior housing in their portfolios have seen occupancy dip down into the mid-70s% range in recent quarters.
HTA’s liquidity profile appears very solid. The company has $115 million of cash on the balance sheet, plus its entire $500 million credit facility available through 2022. There are no public debt maturities until 2026, and just $900 million in loan maturities in 2023-2024. HTA’s last trip to the public debt market was in September of last year ($800 million 10-year notes), which it used the bulk of the proceeds to retire maturing debt. Perhaps most importantly, HTA utilizes only a minimal amount of secured debt (<1% of assets) as most of its properties are currently unencumbered, leaving it plenty of opportunity to generate capital if necessary.
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