Healthcare Realty’s Management Overhaul – C-Suite Transitions

Real estate investors that don’t want to deal with the hassle of managing properties themselves have the option to get exposure through publicly traded real estate investment trusts or REITs. The advantages (or misfortune) of leverage and depreciation through private ownership are swapped for liquidity and greater transparency. These REITs come in many flavors with different characteristics and are in and out of favor at various times in a market cycle.

Office REITs are in purgatory right now while data center REITs have been granted admission through the pearly gates. We wrote about a REIT that focuses entirely on leasing property to the U.S. Postal Service a few weeks ago and in August we wrote about another one that has a portfolio of upscale hotels. This time around we are going to discuss a REIT that focuses on medical office buildings.

• Healthcare Realty is the largest pure-play Medical Office Buildings (MOB) REIT in the United States.
• The company’s properties are on or adjacent to hospital campuses. Dallas, Seattle, Houston, Los Angeles, and Atlanta are its top 5 markets.
• The REIT offers a forward dividend yield of 7.16%, supported by a healthy 79.93% payout ratio based on the company’s funds from operations (FFO).

Over two years later, property operating expenses have increased from 31% to 37%, several points above industry peers. Additionally, HR’s funds from operations (FFO) yield stands at 9%, compared to peers in the 5% to 6% range.

In response to recent challenges, Healthcare Realty Trust has implemented several key leadership changes in recent months to drive growth and operational efficiency:

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