The medical office sector is generally known for its defensive and consistent performance. Most properties have longer term leases with fixed annual rent escalators and have high levels of retention upon expiration.
Healthcare Trust of America, Inc. (NYSE: HTA), the largest dedicated owner and operator of medical office buildings in the United States, has responded to recent inquiries as follows:
The medical office sector is generally known for its defensive and consistent performance. Most properties have longer term leases with fixed annual rent escalators and have high levels of retention upon expiration. This results in very consistent fundamentals, including steady occupancy and same store NOI growth. In fact, Revista, the leading data provider in the medical office sector, notes in their Fourth Quarter Medical Office – Fundamentals Report that from Q1 2015 to Q4 2017, sector same store NOI growth has ranged between 2.6 and 3.0% every quarter.
Since we became a publicly traded company in 2012, HTA’s same store performance has followed a similar pattern, ranging from 2.3% to 3.8% while averaging 3.1%. Our operating fundamentals have remained in a relatively constant range, with our portfolio occupancy running between 90.6% and 91.6% on a quarterly basis. Additionally, we have had limited lease rollover in any given year, with our annual expirations running between 5% and 11% over this same period. HTA has successfully reduced expenses over time by expanding our property management, building service and leasing platform to additional properties it serves in our portfolio. Our earnings, measured as Normalized Funds from Operations per Diluted Share, has grown from $0.26 per share on a split adjusted basis in Q1 2012 to $0.41 per share in Q1 2018, an increase of 56% during this time.
As disclosed in our public filings, we use a same store definition that is consistent with other REITs in our sector. Our Board of Directors reviews and approves our same store property pool on a quarterly basis. We add properties to the same store pool once we have owned them for a full 5 quarters and we only exclude properties we intend to sell in the near term. As stated in our first quarter earnings release, our same-store cash NOI growth was 2.3%. Excluding the MOBs located on our Forest Park campuses, same-property cash NOI growth would have been 3.2%.
Our Chief Financial Officer, Robert Milligan serves as our Principal Financial Officer and Principal Accounting Officer. In that capacity he is responsible for executing our required certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as he has properly done. Mr. Milligan’s biographical information set forth in HTA’s most recently filed Form 10-K is accurate, and at no time was Mr. Milligan obligated to be licensed with the SEC or FINRA while he was employed with his former employer, Bank of America Merrill Lynch. Mr. Milligan is ably supported in his accounting responsibilities by David Gershenson, our Chief Accounting Officer and a long-time certified public accountant.
HTA is a strong advocate of best practices in governance matters. It has demonstrated this commitment in a number of ways, including (i) through the addition of four new independent directors over the last few years, two of whom have been women and all of whom have been industry leaders of high integrity with strong credentials, reputations and skills, and (ii) through bylaw amendments designed for the best interest of stockholders.
About Healthcare Trust of America, Inc. (NYSE: HTA)
Healthcare Trust of America, Inc. (NYSE: HTA) is the largest dedicated owner and operator of medical office buildings in the United States, comprising over 24 million square feet of GLA, with over $7 billion invested primarily in medical office buildings. HTA provides real estate infrastructure for the integrated delivery of healthcare services in highly-desirable locations. Investments are targeted to build critical mass in 20 to 25 leading gateway markets that generally have leading university and medical institutions which translates to superior demographics, high-quality graduates, intellectual talent and job growth. The strategic markets HTA invests in support a strong, long-term demand for quality medical office space. HTA utilizes an integrated asset management platform consisting of on-site leasing, property management, engineering and building services, and development capabilities to create complete, state of the art facilities in each market. This drives efficiencies, strong tenant and health system relationships, and strategic partnerships that result in high levels of tenant retention, rental growth and long-term value creation. Headquartered in Scottsdale, Arizona, HTA has developed a national brand with dedicated relationships at the local level. Founded in 2006 and listed on the New York Stock Exchange in 2012, HTA has produced attractive returns for its stockholders that have significantly outperformed the S&P 500 and US REIT indices. More information about HTA can be found on the Company’s Website, Facebook, LinkedIn and Twitter.
This press release contains certain forward-looking statements. Forward-looking statements are based on current expectations, plans, estimates, assumptions and beliefs, including expectations, plans, estimates, assumptions and beliefs about HTA, stockholder value and earnings growth.
The forward-looking statements included in this press release are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond HTA’s control. Although HTA believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, HTA’s actual results and performance could differ materially and in adverse ways from those set forth in the forward-looking statements. Factors which could have a material adverse effect on HTA’s operations and future prospects include, but are not limited to:
• changes in economic conditions affecting the healthcare property sector, the commercial real estate market and the credit market;
• competition for acquisition of medical office buildings and other facilities that serve the healthcare industry;
• economic fluctuations in certain states in which HTA’s property investments are geographically concentrated;
• retention of HTA’s senior management team;
• financial stability and solvency of HTA’s tenants;
• supply and demand for operating properties in the market areas in which HTA operates;
• HTA’s ability to acquire real properties, and to successfully operate those properties once acquired;
• changes in property taxes;
• legislative and regulatory changes, including changes to laws governing the taxation of REITs and changes to laws governing the healthcare industry;
• fluctuations in reimbursements from third party payors such as Medicare and Medicaid;
• changes in interest rates;
• the availability of capital and financing;
• restrictive covenants in HTA’s credit facilities;
• changes in HTA’s credit ratings;
• HTA’s ability to remain qualified as a REIT;
• changes in accounting principles generally accepted in the United States of America, policies and guidelines applicable to REITs;
• delays in liquidating defaulted mortgage loan investments; and
• the risk factors set forth in HTA’s most recent Annual Report on Form 10-K and in HTA’s most recent Quarterly Reports on Form 10-Q.
Forward-looking statements speak only as of the date made. Except as otherwise required by the federal securities laws, HTA undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they are made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this press release or that may be made elsewhere from time to time by, or on behalf of, HTA.