Activist Investor Pushes For Healthcare Trust Of America To Sell Itself
Elliott Investment Management has sent an open letter to Healthcare Trust of America urging the REIT to put itself on the market, arguing that HTA has underperformed and that the cost of capital makes it noncompetitive.
Scottsdale, Arizona-based HTA specializes in medical office buildings, owning about 25.3M SF of MOBs as of the end of Q2 2021. During the third quarter of this year, it has acquired an additional four medical office properties totaling 469K SF, including two buildings in Houston, one in Boca Raton, Florida, and one in Colorado Springs, Colorado. The company is also developing a 109K SF MOB in Dallas.
As of the end of Q2, HTA reported that its portfolio is 87.9% occupied. Its funds from operations, an important REIT metric, came in at 44 cents per share in the second quarter, up 10% compared with the same quarter in 2020.
In August, HTA founder Scott Peters abruptly resigned as the company's chairman, president and CEO. The company gave no reason for his departure and named Peter Foss, one of its independent directors, as interim president and CEO.
Florida-based Elliott is a hedge fund run by billionaire Paul Singer and is a major shareholder in the REIT, though the exact size of its stake isn't clear, Bloomberg reports. Along with a letter, Elliott sent graphs to illustrate its contentions.
One graph compares HTA shareholder returns over the past five years to various other metrics, including the Russell 3000 Index, MSCI US REIT Index, and a healthcare REIT peer average. HTA did worse than all of those, Elliott says.
Elliott also published a graph detailing how, on average, diversified REITs can pay 20% or more than MOB REITs for the same asset, citing Green Street Advisors data. Another graph claims that given cap rate compression, HTA will have a harder time finding acquisitions.
In the letter, Elliott asserts that highly credible buyers will come forward with offers to buy HTA at a substantial premium to the current trading price. The hedge fund also says that since news of its desire for HTA to sell itself was first made public, other top shareholders have gotten in touch to voice support for a strategic review, including an active solicitation of bids.
"Elliott also commissioned a third-party survey that shows that shareholders support its thesis that HTA should explore a sale at a premium valuation rather than pursue a stand-alone growth path," the letter says.
HTA didn't respond to a request from Bisnow for a comment about the letter as of Monday afternoon.
During the HTA's most recent earnings call in early August — days after Peters resigned — Foss said that the company was in great shape.
“We have full-service capability that [is] focused on delivering for our tenants,” he said. “We have a strong balance sheet that allows us to invest. We have demonstrated ability to grow our earnings and our dividends.”
Shares of the HTA rose modestly on Monday morning when word of the letter broke, rising from $31.80 to about $32.30 by midday. HTA shares began this year trading for $26.20.