HTA is dedicated to the medical office sector, which allows the company to create dedicated, long-term relationships with healthcare systems, academic medical centers and teaching hospitals, key physician groups, developers, and other industry participants in this space. The portfolio consists of medical office properties that will continue to be core-critical real estate to the delivery of healthcare as demand grows and as the integration of the macroeconomic tailwinds shape the delivery of care.
HTA’s business strategy is underlined by establishing critical mass in key markets where HTA’s institutional property management and in-house leasing platform can generate scale, maximize expense efficiencies, and build lasting tenant relationships. To meet the specialized needs of healthcare providers, HTA has developed one of the industry’s most comprehensive asset management platforms that includes dedicated professionals in property management, leasing, engineering, accounting, construction and facilities management. Approximately 22.3 million square feet of space is currently managed by HTA’s national platform which is directed from HTA’s corporate headquarters in Scottsdale, Arizona and executed through several regional offices across 33 states.
HTA believes medical office buildings provide stable cash flows with relatively low vacancy risk, while still allowing for potentially higher returns through exposure to the fast growing healthcare sector. With dedication to this sector, HTA has generated shareholder returns that average 10% per annum since its founding through December 31, 2017. HTA pays a consistent dividend of $1.22 per annum, paid quarterly, that is supported by recurring and stable cash flows.
Medical Office is benefiting from several significant macroeconomic drivers, such as an aging population, millennials beginning to form families, and an increase in the insured population. These trends are driving growth in healthcare spending at a rate significantly faster than the broader U.S. economy. The U.S. population is experiencing significant aging of its population, as advancements in medical technology and changes in treatment methods enable people to live longer. This is expected to drive healthcare utilization higher as individuals consume more healthcare as they get older. Between 2016 and 2026, the U.S. population over 65 years of age is projected to increase by more than 37% and total over 19% of the U.S. population as the baby boomer generation enters retirement. Individuals of this age spend the highest amounts on healthcare, averaging over $5,800 per individual over the age of 65 according to 2014 Consumer Expenditure Survey. This compares to healthcare expenditures of less than $1,600 per year for individuals under the age of 30. The older population group will increasingly require treatment and management of chronic and acute health ailments. Much of this increased care is taking place in lower cost outpatient settings, which we believe will continue to support MOB demand in the long term.
In addition, the large millennial generation is just now starting to reach their thirties and form families, which should result in average healthcare expenditures for this age group doubling. As this large generation utilizes additional healthcare services, it is expected they will choose more convenient outpatient settings. The number of insured individuals in the U.S. continues to increase, as the population grows and as a result of the impact of U.S. government actions, including the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”). Since 1999, the number of individuals covered by healthcare insurance in the U.S. has increased over 20%. Although government policies may change under different administrations, the emphasis on providing affordable healthcare insurance for individuals is expected to remain a priority for government officials.
At the same time, technological advances are pushing healthcare into more cost efficient and integrated outpatient settings. As a result, hospitals are reevaluating their business models to capture gains in efficiency. This push is driving medical procedures and other healthcare delivery, which has historically been conducted at a hospital, into outpatient settings via medical offices. Similarly, physicians and health systems are grouping together to increase their overhead efficiency and invest in new technology. Healthcare is increasingly being provided in part by nurses, physician assistants, and allied health providers – a key reason that healthcare is expected to be the fastest growing employment sector of this decade.