Healthcare Trust of America Will Merge with Healthcare Realty Trust for $18B

Medical office building owner and operator Healthcare Trust of America (NYSE: HTA) will merge with real estate investment trust Healthcare Realty Trust (NYSE: HR) in a strategic deal that will create a prominent medical office building real estate investment trust (REIT) company.

Pursuant to the deal, announced February 28, HTA shareholders will receive a total implied value of $35.08 per share, which consists of a $4.82/share special cash dividend and a 1:1 transaction exchange ratio which is based on HR’s unaffected price of $30.26 on February 24. The $35.08 price represents and 18.2% premium. The special cash dividend will be financed through joint venture transactions and asset sales.

Accordingly, the combined company “will have a pro forma equity market capitalization of approximately $11.6 billion and a total enterprise value of $17.6 billion based on the implied values at market close on February 24, 2022.” HR shareholders will own 39% and HTA shareholders will own 61% of the company.

As noted in the filings, the combined company will be led by Healthcare Realty’s management team, whereby Todd Meredith will be President and CEO and Kris Douglas will be the Executive Vice President and CFO. The board of directors will consist of nine existing directors Healthcare Realty, three members from the Healthcare Trust board and a new member agreed on by both parties. Knox Singleton, who is Chairman of Healthcare Realty’s board will be chairman of the combined company and Brad Blair the Chairman of Healthcare Trust’s board will be the Vice Chairman of the company.

“We are pleased to announce this strategic transaction, which unites two highly complementary medical office portfolios and represents a rare opportunity to create a sector-leading REIT in terms of both size and quality,” Todd Meredith, President and Chief Executive Officer, Healthcare Realty, said in a statement. “We believe all shareholders will benefit from the Company’s expanded national footprint from HRs Seattle portfolio to HTAs Boston portfolio. The Company will have unmatched market scale in concentrated clusters, meaningful corporate and operational synergies, and a larger development pipeline.”

As stated in the filings, the transaction is expected to have strategic, operational and financial benefits, including that it “creates preeminent, high quality MOB REIT,” specifically the company will “be the largest pure-play MOB REIT”; it will have “critical scale with enhanced clusters,” as the company “will own over 1 million square feet in 14 distinct markets,” among other distinctions. The deal will also expand relationships and diversify portfolios; specifically, it will include properties associated with 57 of the top 100 health systems in the United States on or adjacent to 231 hospital campuses. This will also help grow the company’s development pipeline via more than $2 billion focused on high-growth markets like Seattle, Houston and Denver.

“This transformative transaction joins two premier real estate companies with a combined value that we believe is much greater than the sum of its parts, with the operational and financial scale necessary to compete and drive sustainable value creation,” Brad Blair, Chairman of the Board, Healthcare Trust of America, said in a press release.

Upon consummation, the combined company will operate under the Healthcare Realty name and will trade under the HR symbol on the NYSE.

The reverse triangular merger is expected to close in Q3 2022, subject to customary closing conditions including shareholder approval.

Healthcare Realty Trust is represented by Hunton Andrews Kurth LLP and its financial advisor is Scotia Capital (USA) Inc. and Citigroup Global Markets Inc. Healthcare Trust of America is represented by McDermott Will & Emery and its financial advisor is J.P. Morgan Securities LLC.

Prior to the announcement, HR and HTA’s stock were valued at $29.35 and $31.04, respectively on February 25. When it was announced on February 28, HR and HTA’s stock were valued at $26.08 and $29.39, respectively. Approximately a week later on March 7, HR’s stock was valued at $27.32 and HTA’s was valued $31.08.