Healthcare Trust Targets 1M SF by Year End

Mark D. Engstrom, executive vice president of acquisitions with Healthcare Trust of America says the majority of acquisitions currently under contract should close within the next couple of weeks. In addition to the Texas and Indiana portfolio, the company has signed agreements to buy the 66,400-square-foot Hampden Place Medical Center in Denver, a portfolio in Sun City, AZ and the Mary Black Medical Office Building in Spartenburg, SC.

Furthermore, the REIT recently closed on $37 million in first mortgage financing for Rush Medical Office Building in Chicago, which includes purchasing rights. Also ushered into HTA's portfolio was the 62,000-square-foot Smyth Professional Building in Baltimore.

Engstrom tells GlobeSt.com that the buying activity for the REIT isn't unusual; since 2006, the REIT has been steady acquiring assets every quarter. It's also been raising capital; at the end of Q3 2009, HTA had $300 million in its account, and is determined to make good use of the cash.

"It's a competitive advantage to close all cash, and it's more attractive to a seller," Engstrom explains, saying that sometimes debt is placed on the asset after purchase. For example, he says, HTA is seeking approximately $70 million in debt to place on a Greenville, SC portfolio acquired in September.

The REIT's current portfolio consists of 90% medical office buildings, with the remainder consisting of related assets such as assisted living and skilled nursing. Engstrom says two-thirds of the assets are campus properties, with one-third of the portfolio consisting of single-tenant buildings.

Engstrom says the REIT will continue building its portfolio for the foreseeable future for several reasons. One, he explains, is an aging population, which will lead to more demand for health care services. Second, though it won't happen immediately, is the anticipated numbers of patients swelling as more uninsured people come into the system, via health care reform.

"It's more a redirection of care," he comments. "We won't necessarily see more, but they'll be treated in a more appropriate setting; medical office buildings or outpatient centers, as opposed to emergency rooms."

Furthermore, Engstrom believes that healthcare reform will also drive consolidation among providers, with hospitals integrating physician practices. That potential vertical integration is why HTA wants to continue sticking close to campus office buildings, especially in key markets.

"We think this growth and integration is a trend that's long-term," he adds. "It's good for us as owners of medical office buildings."