NEW YORK (TheStreet) -- Healthcare Trust of America (HTA) - Get Report last week listed its medical office-focused REIT on the New York Stock Exchange. This inaugural listing was American Realty Capital's subsidiary, Realty Capital Securities, the second successful non-traded REIT listing this year.
The first to list was
American Realty Capital Trust
, a triple-net sector REIT that listed on March 1. Investors purchased these formerly illiquid shares at $10 each and during its first 28 days since the listing, 72 million shares traded and ARCT hit an all-time high, closing at $11.24 per share on April 10. The most recent price for the newly listed stock was $10.70, and the $1.70 billion (market cap) REIT is paying a dividend yield of 6.5%.
By tapping the public markets, HTA's non-traded REIT investors will be able to access targeted full-cycle liquidity while also achieving full investor confidence in an industry that is perceived to be less mainstream. This is a significant milestone for the sponsor as well as the REIT industry as bad news has plagued several non-traded REIT sponsors like Apple REIT, Inland Group, Behringer Harvard and others.
HTA listed its shares (229.5 million common shares) last week and the health-care REIT intends to unlock around 25% of its liquidity. By controlling the demand, HTA will utilize a "Dutch auction" tender offer by buying back up to $150 million of its shares, an emerging method to take a non-traded REIT into the public space. Also by releasing 25% of the shares every six months, HTA will control the potential demand while also attempting to maintain low volatility within the $2.5 billion portfolio. (Class A shares list today and Class B-1 shares list in six months, B-2 shares list in 12 months and Class B-3 shares list in 18 months.)
By entering the public REIT sector, HTA will become the fifth-largest health-care REIT with assets of around $2.5 billion comprising 264 buildings and around 12.44 million square feet. The portfolio is well-balanced with medical-related properties spread over 26 states.
In addition, HTA's portfolio is balanced with a mix of single-tenant and multi-tenant facilities. The majority (90%) of HTA's facilities are leased to medical-office providers and
Healthcare Realty Trust
is the only other medical REIT with a focused medical office model. HTA has a diverse tenant portfolio with a large majority (56%) of credit-rated tenants. In addition, 39% are considered investment-grade and 44% are considered non-rated (mainly independent physicians).
With a portfolio of around 1,600 leases, HTA has solid and stable cash flows. The necessity-driven model has attracted many leading medical related tenants and the core medical office focus has resulted in an extraordinarily high-quality portfolio. Here is a snapshot of the top 13 tenants:
HTA has been successful with building a capital base that has led to its inaugural listing on the NYSE today. Since 2007, HTA has closed on around $2.55 billion in acquisitions:
With just around 18% secured debt ($639.1 million) and an undrawn $575 credit facility and $30 million in cash (both as of March 31), HTA will enter the public REIT space as one of the better-capitalized medical office sector REITs (JPMorgan Securities, Deutsche Bank and Wells Fargo Securities lead the $825 million unsecured credit facility).
HTA's tenant base is solid and the overall credit is mix is excellent. By focusing on medical office properties (90% of portfolio), HTA maintains a competitive advantage distinguished by above-average occupancy fundamentals (91%).
In addition, HTA's conservative balance sheet combined with its right-sized credit facility should enable the REIT to grow revenue and build accretive funds from operations (FFO). The dividend yield is 5.5% and that appears to be in line with the industry peer group.
In this article, I have included the following publicly traded health care REITs: Healthcare Realty Trust Inc.,
Omega Healthcare Investors Inc.
Health Care REIT Inc.
HTA closed on Friday at $9.85 with a market value of $2.27 billion. The fundamentals for this new public health-care REIT are strong, and investors should consider a position in this core medical office sector alternative.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any within 72 hours.