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Healthcare Realty Completes MOB Buyouts in Potential Markets

Zacks Equity Research

Expanding its medical office building (MOB) portfolio, Healthcare Realty Trust Incorporated HR recently purchased four MOBs in three separate transactions. The company shelled $121 million for the acquisition.

Notably, net proceeds amounting to $115.9 million from the company’s recent equity offering was utilized to fund the acquisition.

Transactions Details

On Mar 28, Healthcare Realty acquired a multi-tenant MOB on Indiana University Health’s Methodist Hospital campus in Indianapolis. The purchase price was $47 million. Further, the 143,499-square-foot building is now 100% leased.

On the same day, the company acquired two multi-tenant MOBs on the campus of Inova Health System’s Fair Oaks Hospital, in the Washington, D.C. region, for an aggregate price of $46 million. The buildings, spanning 158,338 square feet of space, are 72.8% leased.

Lastly, on Apr 2, it acquired a multi-tenant MOB, spanning 47,936 square feet, for $28 million. The property, adjacent to Piedmont Hospital in the Buckhead area of Atlanta, is 100% leased.

The four properties were acquired at average capitalization rate of 5.3% and are currently 87.7% leased. The transaction enhances Healthcare Realty’s foothold in three of its top markets. Further, it strengthens the company’s relationships with three preeminent, high-grade health systems.

As demand for MOBs continues to surge, Healthcare Realty’s focus on this property type is a strategic fit. The heightening popularity of MOBs and outpatient facilities can be tied to the fact that these are considered the safest healthcare realties. This is because MOBs are less vulnerable to reimbursement and regulation changes, and have predictable revenue streams compared with other healthcare real estate assets with similar exposure.

In fact, going by statistics, the U.S. hospital and outpatient care-center market is projected to grow from $1060 billion in 2016 to more than $1275 billion by 2020. While companies like While Healthcare Trust of America HTA and Physicians Realty Trust DOC have been benefiting from their existing MOB footprint, peers like HCP Inc. HCP and Ventas Inc. VTR are emphasizing on strategies to invest more in these healthcare assets.

Shares of this Zacks #3 (Hold) Ranked company have outperformed its industry over the past six months, gaining 12.6% compared to the industry’s growth of 11.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Healthcare Trust of America, Inc. (HTA) : Free Stock Analysis Report
Healthcare Realty Trust Incorporated (HR) : Free Stock Analysis Report
Physicians Realty Trust (DOC) : Free Stock Analysis Report
Ventas, Inc. (VTR) : Free Stock Analysis Report
HCP, Inc. (HCP) : Free Stock Analysis Report
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