Activist company

Major healthcare REITs are set to consolidate for a $10 billion company

Left to right: Todd Meredith, Managing Director, Healthcare Realty Trust; Peter Foss, Interim President and CEO, Healthcare Trust of America (Healthcare Realty Trust, Healthcare Trust of America, iStock)

Two $2 billion healthcare real estate investment trusts are about to combine into a giant medical office.

Healthcare Trust of America is in advanced talks to merge with Healthcare Realty Trust, The Wall Street Journal reported. People familiar with the matter told the Journal that the cash and stock deal could be finalized in the coming days, but talks could still break down.

The terms of the potential transaction were unclear.

Healthcare Trust of America had a market value of around $6.6 billion as of February 24, while Healthcare Realty Trust was worth $4.6 billion. The Journal reported that a combined company could be valued at more than $10 billion.

Both trusts own and operate medical practices across the country. Healthcare Trust of America has over 25 million square feet in its portfolio; Healthcare Realty Trust has approximately 18 million square feet.

Healthcare Trust of America, based in Scottsdale, Ariz., has been considering a sale for months under pressure from activist shareholders, the Journal reported. The trust was founded in 2006 and went public in 2012, but saw mixed stock market results, including a slump at the start of the pandemic. Former CEO Scott Peters resigned in August without explanation.

In September, the REIT purchased 1905 Medical Center in Boca Raton for $50 million. The REIT was previously part of a consortium that sold a 459-bed hospital property, three office buildings and a medical office shopping center in Lauderdale Lakes to Medical Properties Trust for $171 million.

Healthcare Realty Trust is based in Nashville. According to the Journal, the trust’s fourth-quarter earnings included a 5.3% increase in normalized funds from operations year-over-year.

San Clemente-based CareTrust REIT began exploring a sale in late 2021 as it faced pandemic-related challenges. The trust has a market capitalization of approximately $2.1 billion and owns 224 properties in 27 states, including healthcare properties, nursing homes and senior housing.

Investors have flocked to medical practices since the pandemic began. The Journal reported in April that doctors and medical tenants stay more up-to-date on rent payments than other office tenants, leading major players to invest in the sector.

[WSJ] —Holden Walter-Warner