Wachovia Initiates Healthcare Realty Trust (HR) with an Outperform

July 18, 2008 9:30 AM EDT

Wachovia initiates coverage on Healthcare Realty Trust (NYSE: HR) with an Outperform rating and a $26 to $28 valuation range.

The firm said, "Though HR trades at a premium using P/FFO multiples, it remains in line compared to peers using P/NAV. We believe the company's proven development track record and sizable current pipeline of $260mm will provide a channel for strong returns and growth potential into 2009-10. This contrasts to its non-development oriented peers that could be weighed down by acquisitions of 'richly' valued MOB assets."

The firm also highlighted that HR has development expertise and "remains one of only a few public Healthcare REITs with the experience and track record to undertake large scale development projects ($500mm in developed assets over the past 15 years)." Development usually yields 9-10% which compares favorably to 7-8% acquisition yields. This causes the firm to believe HR should be able to deliver stronger earnings growth and sizable NAV upside via value creation.

The company also maintains strong ties with large healthcare systems (e.g. Baylor Healthcare System, HealthSouth, HCA, etc.), "providing for potential built-to-suit opportunities and improved channel for development lease-up." Also, the company has exposure to high population growth areas (TX, FL, & CA), which should boost future tenant demand needs.

Healthcare Realty Trust Incorporated, a real estate investment trust, engages in the ownership, acquisition, management, and development of real estate properties associated with the delivery of healthcare services in the United States.

Related Categories

New Coverage

Stocks Mentioned

Related Entities

• Wachovia

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?