Healthcare spending continues to grow as people age and the rate of those insured rises. That's enabling healthcare systems to expand their reach to serve more patients. This expansion is driving demand for additional medical office space so healthcare providers will have the room they need to provide the best care for their patients.
One of the leaders in owning these medical office buildings is Healthcare Trust of America (NYSE: HTA), or HTA. Here's a closer look at this real estate investment trust (REIT).
Healthcare Trust of America profile
HTA is a healthcare REIT focused on owning and operating medical office buildings in the U.S. As of the end of 2021's first quarter, HTA owned 471 healthcare properties with 25.6 million square feet of gross leasable area across 32 states. Overall, 95% of its portfolio -- 453 properties with 24.2 million square feet -- were medical office buildings, making it the country's largest dedicated owner of medical office buildings. It also owned 15 hospitals (4% of its portfolio) and three senior care facilities (1%).
The REIT focuses on building large-scale positions in top metro areas. Its biggest markets included:
- Dallas: 9.7% of its annualized base rent (ABR)
- Boston: 6.3%
- Houston: 5.8%
- Miami: 4.8%
- Indianapolis: 4.6%
- Hartford/New Haven, CT: 4.5%
- Atlanta: 4.5%
- Phoenix: 4.4%
- Tampa: 4.4%
- Pittsburgh: 3.6%
- Remaining top metro markets: 41.1%
- All other markets: 6.3%
HTA focuses on the largest metro areas, most of which have academic hospitals and need lots of medical office space. It also concentrates on owning a large share of each market to gain scale advantages. Overall, its top 20 markets make up more than 75% of its ABR, portfolio, and invested capital. Also of note, most of its biggest markets are in the fast-growing Sun Belt region.
The REIT leases space in its facilities to various tenants, with its 10 largest contributing 30% of its ABR. The bulk of its tenants are health systems and universities (59% of its ABR). The rest of its tenant base is national or large regional providers (15%) or local healthcare providers (26%). A significant portion (45%) have investment-grade credit ratings, implying they have the financial strength to continue paying rent even if economic conditions deteriorate. Finally, it leases space to tenants across a wide variety of specialties, including:
- Primary Care: 17%
- Orthopedics/Sports Medicine: 9.2%
- Obstetrics/Gynecology: 7.3%
- Cardiology: 5.2%
- Oncology: 3.7%
- Imaging/Diagnostics/Radiology: 3.7%
- Eye and vision: 3.3%
- General Surgery: 2.5%
- Other Specialty: 34.4%
- Ambulatory Surgery Center: 5%
- Education/Research: 2.7%
- Pharmacy: 0.9%
- Other: 5.1%
Healthcare Trust of America news
HTA delivered solid results in 2020 despite the pandemic's impact on the U.S. healthcare system. Overall, it collected more than 99% of the rent it billed last year. Further, while it granted $11 million of rent deferrals, it only had $2.6 million outstanding as of early 2021. Because of that solid rental collection rate, HTA grew its FFO per share by 4% from 2019's level, in line with its guidance. Driving growth was higher rental rates and the continued expansion of its portfolio.
The REIT acquired $181 million of medical office buildings in 2020 -- including $129 million in the fourth quarter -- totaling more than 600,000 square feet. The company also sold one property for $17 million and completed the first development project it started, a 127,000-square-foot Class A medical office building in Raleigh, North Carolina. It had three more developments under construction at year-end.
HTA got 2021 off to a solid start. It grew its FFO by 4.4% year over year, hitting a company record of $0.44 per share in the quarter. Meanwhile, it closed $32.5 million of acquisitions during the first quarter, adding 117,000 square feet to its portfolio. The REIT agreed to acquire another $154 million in properties right after the quarter ended, with those deals expected to close in the second quarter. It also agreed to sell a portfolio of 13 properties in Tennessee and Virginia for $67.5 million that should close in the second quarter.
The REIT finished two of its remaining development projects during the first quarter and was on track to complete the final one in the third quarter. Meanwhile, it had three additional development opportunities representing more than 300,000 square feet in the pipeline in the pre-leasing phase. It also completed the renovation of a medical office building complex in the quarter.
Healthcare Trust of America stock price
HTA's strategy of focusing on medical office buildings hasn't delivered the desired result for investors in recent years: