Medical Office Buildings, 5% Yield, 8% 2020 Growth: Healthcare Trust Of America (NYSE:HTA)

Given the rapid graying of America, with ~10,000 boomers turning 65 every day, it seems that healthcare should be a good sector to check out for future growth. However, all sub sectors within healthcare aren’t generating the same enthusiasm – senior living facilities have come under pressure, for example, while medical office buildings, MOBs, seem to be the sweet spot in this industry.

The high cost of in-patient care has accelerated the move toward higher utilization of MOBs. Another positive factor is that MOB tenants, networks which are often run by doctors, usually are reluctant to vacate a facility/locale where they’ve built up a practice and a relationship with a local hospital. Adding to this is the fact that many MOBs are on hospital campuses, (Healthcare Trust Of America (HTA) is the biggest on-campus owner), which helps patient and doctor logistics. One other supportive feature – MOBs put their REIT owners one further step away from regulatory risk.

Healthcare Trust Of America is the largest MOB landlord REIT in the US, with 25M square feet of on-campus space:

(HTA site)

HTA’s MOB’s form 93% of its holdings, with multi-tenant properties its largest sub-segment, at ~68%, followed by single tenant properties, at 25.2%. It also owns 6% worth of hospitals and just 1% of Senior Care facilities:

(HTA site)

Health systems & Universities form 59% of its annualized base rent, followed by local healthcare providers, at 26%, and national/regional providers, at 15%. 45% of its tenant base is rated investment grade. No single market accounts for more than 10% of rent, and no single-tenant accounts more than 4.2%:

(HTA site)

HTA’s biggest US state exposure is in Texas, with Dallas and Houston forming ~18% of its portfolio. The Southwest is its leading region, at 33.7% of base rent, followed by the Southeast, at 29.2%, the Northeast, at 21.5%, and the Midwest, at 15.3%. It has a tiny presence in the Northwest, at less than 1%.

(HTA site)


Unlike most companies in the 1st half of this challenging year, HTA actually had much better growth in Q1-2 2020 than it did in full year 2019. Revenue grew 7%, FFO grew 8% in Q1-2 2020, Normalized FAD grew 6%, and Net income rose 5.38%:

Same store growth was 2.7% in Q1 20, and then slowed to .6% in Q2 due to the lockdowns and patients delaying elective procedures. HTA has averaged 2.7% same store growth since 2015, which is just above the REIT MOB average of 2.6%.

(HTA site)

In Q2 2020, HTA collected 98% of contractually scheduled rents, including 3% of rents subject to deferral agreements or ~$6 million. Half of those were made to leading healthcare systems with whom they agreed to defer rent as a sign of a long-term partnership philosophy. Collections in July and August were consistent with these levels.

Management also signed ~1.2 million square feet of renewals, with almost 500,000 square feet of early renewals, which allowed HTA to extend terms at attractive rates. ~90% as tenants opted to stay in place while operating through Q1-2 2020.


After investing ~$558M in 2019, the COVID lockdowns slowed new investments down to just $41.5M in the first half of 2020.

(HTA site)


HTA has five-year dividend growth rate of 7.64% – management increased the quarterly dividend to $.32, from $.315, in September. At $25.48, it yields just over 5%.

It goes ex-dividend in an April/July/Oct./late Dec. schedule, and pays in the early part of the following month. Its trailing 12-month FFO/dividend payout ratio is 81.29%, down slightly from its 2019 ratio of 81.7%.

(HTA site)


ROA, ROE and total debt/equity were nearly unchanged in Q2 2020 vs. Q4 2019, and remained below healthcare REIT industry averages. whereas the EBITDA Margin slipped to 60.58%, and EBITDA/interest coverage was lower, but still healthy, at 4.48X. Trailing net debt/EBITDA was higher, at 6.33X.


HTA has ample access to the capital markets – the vast majority of its debt is unsecured. As of 6/30/20, it had total liquidity of ~$1.1B, including ~$278M of equity which was raised on a forward basis in Q4 2019.

(HTA site)

In September, HTA issued an $800M offering of 2.000% senior unsecured notes due 2031, the net proceeds of which will be used to redeem all outstanding 3.70% Senior Notes due 2023, to repay outstanding indebtedness for general corporate purposes.

HTA’s next major debt maturity isn’t until 2022, when its credit revolver comes due:

(HTA site)


HTA appears to be getting a premium trailing FFO/share valuation – it’s 16.44X, vs. an industry average of 13.49X. Investors like the current resilience and future prospects of the MOB niche. Its other valuations are roughly in line.

Analysts’ Price Targets and Earnings Estimates:

Analysts have an average price target of $30.00 for HTA. At $25.48, it’s 17.74% below that target.

Looking forward, analysts are estimating 9.15% FFO growth in 2020 – HTA’s 2020 forward price/FFO ratio is 15.26. So far, the 2021 growth estimate is more subdued, at 2.4%:


If you’re looking for lower entry price for HTA, selling cash secured puts below its price/share could accomplish that. HTA’s January 2021 $25.00 price strike has a bid of $1.20, offering you an annualized yield of 20.86%, and a breakeven of $23.80, which is 15.5% above its 52-week low of $23.80, and ~21% below its $30.00 average price target.

NOTE: Put sellers don’t receive dividends. We add them to our put options charts, so you can compare them to the options dollar amounts. We use annualized yield in all of our options tables, so that users can compare trades of different lengths.

You can see more details for this trade on our free Cash Secured Puts Table.

All tables by, except where noted otherwise.

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in HTA over the next 72 hours. 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.

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Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

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