Healthcare Trust of America, Inc. announced investment activity of over $200 million in new development projects and acquisitions since June 30, 2019. These include the announcement of two on-campus medical office building (“MOB”) developments with total investments of approximately $85 to 90 million, and approximately $115 million of acquisitions closed in the third quarter of 2019.
“These developments and acquisitions demonstrate HTA’s continued ability to find and create investment opportunities at attractive yields with leading health systems in our key markets,” stated Founder, Chairman and CEO Scott D. Peters. “The local knowledge and relationships generated from our national operating platform gives us the access and insight to make these investments with a focus on performing over the short and long-term to generate shareholder value.”
New Development Projects
HTA has reached agreements to develop two new on-campus MOBs with leading health systems in HTA’s existing markets. These developments will total approximately 190,000 square feet of GLA and will be developed at expected costs of $85 – $90 million. The developments are expected to have commitments to lease of more than 73% of the space prior to the start of construction, and are being developed to anticipated stabilized yields of over 6.5%. The projects include:
• Pavilion III MOB (Dallas, TX). HTA will develop a Class A MOB with 107,000 square feet of GLA on the new Medical City Heart Hospital and Spine Hospital campus (formerly Forest Park). Construction is expected to begin in the fourth quarter of 2019 and be completed by the first quarter of 2021 at an expected cost of approximately $55– $60 million, including structured parking. This fee-simple development will support the recent expansion of this health system campus that will provide leading cardiac and orthopedic services to Dallas. HTA currently owns two existing MOBs on this campus that are over 90% leased as of June 30, 2019. With this development, HTA’s investment on this campus will increase to over 300,000 square feet of GLA of fee-simple, on-campus MOBs located in critical, Dallas medical real estate. The Company has also entered into a contract to purchase a 6 acre parcel of land located immediately adjacent to the campus which it intends to hold for future expansion.
• Memorial Hospital MOB (Bakersfield, CA). HTA will develop a Class A MOB with 84,000 square foot of GLA located on CommonSpirit’s (formerly Dignity) Memorial Hospital in Bakersfield, CA. This MOB is expected to cost approximately $30 million to develop, with construction expected to begin in the fourth quarter of 2019 and be completed by the first quarter of 2021. This development will expand HTA’s relationship with CommonSpirit to a 10th hospital campus and will bring occupancy with HTA to over 470,000 square feet with this key health system.
Between June 30, 2019 and the end of August, HTA had closed on approximately $115 million of primarily on-campus MOBs in the quarter at anticipated, in-place year-one yields of over 5.6%, prior to any synergies from the Company’s full service operating platform. These MOBs have 262,000 square feet of GLA, are 94% leased as of the time of acquisition, and are located in key markets that the Company intends to grow over the long term. During 2019, HTA has now closed on $208 million of acquisitions totaling 527,000 square feet of GLA, with expected year one contractual yields over 5.8%, before any operating synergies. These properties are approximately 90% leased as of closing, and are well located within dynamic submarkets in HTA’s key markets. Over 74% of the properties located on or adjacent to hospital campuses, however, all of them were acquired on a fee-simple basis.
Third Quarter 2019 acquisitions include:
• Third Street Medical Center (Los Angeles, CA). HTA acquired this Class A MOB with 147,000 square feet of GLA in August for $85.0 million. The MOB is 90% leased and is located in the heart of downtown Los Angeles, adjacent to the St. Vincent’s Medical Center. The building features a well-respected tenant roster including UCLA Health, Children’s Hospital Los Angeles, the internationally renowned House Ear Institute, AltaMed and U.S. Renal Care. HTA’s investment in the greater Los Angeles/ Orange County market now totals more than $325 million with over 700,000 square feet of GLA, all of which is operated by HTA’s property management and building services platform.
• Fairfax Medical Office Building (Fairfax, VA). HTA acquired this MOB with 57,000 square feet of GLA in July for approximately $18.0 million. This building was 98% leased and is located approximately 5 miles from our Inova Fair Oaks MOB in the Washington D.C. metropolitan statistical area. With this investment, HTA’s portfolio in Washington D.C. / Baltimore will increase to almost 340,000 square feet of GLA, allowing for HTA’s local property management and building services.
• Eagle Road Professional Center (Boise, ID). HTA acquired two MOBs totaling 57,000 square feet of GLA in August for approximately $11.0 million. The buildings are 100% occupied and are located directly across the street from St. Luke’s 430 bed Meridian Hospital Campus. This represents HTA’s first investment in fast-growing Boise, which HTA has identified for its long term potential.