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Healthcare Realty Trust Inc. Acquisition Pace Is Up

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Healthcare Realty Trust reported another quarter of steady results and increasing momentum on multiple fronts. Specifically, on the firm’s Q2 earnings call, CEO Todd Meredith focused on three key topics: first, the strength of its acquisition activity year to date; second, how the company is proactively sourcing attractive investments; and third, how the company sees organic and external growth translating to FFO on a per-share basis.

Starting with external growth, Meredith noted that the company’s acquisition pace is up notably, and the company reported nearly $200 million of completed acquisitions at midyear. “We see continued momentum, and we’ve increased our guidance for the year. We’ve been pleased to see a consistent flow of attractive properties. Sellers and brokers have gained confidence, aided by fewer portfolios of scale consuming everyone’s attention, plenty of public and private buyers, low interest rates, and stable cap rates.”

At the same time, he said that Healthcare Realty’s cost of capital has strengthened and afforded the REIT the ability to invest more accretively. “We are capitalizing on attractive market conditions to unearth more investments using our proactive sourcing process. This involves the practice of deeply embedding ourselves in targeted, high-growth markets. Using a team-based approach, we gather local intelligence, systematically collect and analyze market data, and identify desirable properties and potential developments that are not available to the broader market. This quarter, three of the properties we acquired were in the Seattle area, and a result of using our market expertise and three years of patiently working our local connections.”

The company is also seeing increasing benefits from the company’s solid reputation in the MOB space. “Healthcare Realty is known for completing transactions smoothly, following through reliably, and taking great care of our properties and tenants. Over time, our reputation has spread among an expanding network of brokers, sellers, physicians, and health systems, and it leads to repeat business. This credibility has been years in the making and is yielding a marked difference in our ability to source more quality, accretive investments. As an example, two of our longtime health system partners recently reached out regarding potential development projects. With positive traction on these and other developments in our embedded pipeline, we expect a couple of starts in the second half of ’19.”