A few days ago I wrote an article, Time For Your Fall Check-Up With This Sleep Well At Night REIT, in which I examined my current stake in Healthcare Trust of America (NYSE:HTA) while also formulating a "rear view" analysis of my favorite MOB (medical office building) REIT. As I wrote:
Over the last three quarters, the company has grown its same store earnings by more than 3%. That significantly outpaces its peers and is good across most real estate asset classes. Normalized Funds from Operations (or FFO) per share is also up over 7% for the first half of the year; even more impressive when you consider that the company has actually improved its balance sheet during this period - reducing leverage and extending debt maturities.
To build my case around HTA's external growth, I went on to cite the company's year-to-date acquisitions:
So far this year, HTA has announced acquisitions of over $150 million. Given HTA's size, this has expanded the company's asset base by more than 7%. In addition, it appears that the company's investments are expected to produce strong growth in the years to come, through either in-place rent escalators, the ability to grow occupancy, and the ability to increase rental rates as leases come up for renewal.
What Have You Done For Me Lately?
Today HTA announced it had acquired 6 on-campus medical office buildings located in South Florida for approximately $63 million. These buildings total over 428,000 square feet and are located in the Miami - Ft. Lauderdale - West Palm Beach markets. They are all located on-campus with hospitals affiliated with Tenet Healthcare and were approximately 88% occupied at closing. With this latest transaction, HTA has now invested approximately $242 million in 2013. This represents a 9% expansion of HTA's asset base.
In a press release, Scott D. Peters, Chairman and CEO of HTA explains:
We are excited to enter into the South Florida market in a significant way. These are the type of high-quality, on-campus MOBs that we believe will be core, critical real estate as healthcare continues to expand and evolve in this country. This is especially true in the South Florida market which continues to grow in population, remains a premier retirement destination, and will significantly benefit from the Affordable Care Act as it unfolds.
As mentioned in my previous article, HTA has taken steps to ensure consistent growth continues and that is evidenced by the REIT's steps to internalize management and creating a more efficient leasing platform. The latest acquisition was closed at cap rate of around 7% and with 12% of the new Florida portfolio available for lease; the growth potential is encouragingly attractive.
As a new investor in HTA, I am also encouraged to see the company acquiring such a solid portfolio that's poised to grow cash flow through rent bumps and occupancy gains. I like the dividend yield (currently 5.18%) and given HTA's latest $63 million investment, I am even more encouraged that the funds from operations will support a future dividend increase.
HTA's market cap of around $2.6 billion is still small and I'm glad to see the company allocating capital wisely by investing in attractive markets that enjoy exceptional upside and growth. Since September 1st HTA shares have rallied almost 8% moving back closer to a historic valuation of around 17x P/FFO.
Source: SNL Financial
Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.
Disclosure: I am long HTA, O, VTR, HCP, CSG, ARCP, GPT, DLR, UMH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.