Healthcare Realty Trust Expands KKR Joint Venture

Rhea-AI Summary

Healthcare Realty Trust (NYSE:HR) has expanded its joint venture with KKR, contributing $118 million in additional properties and generating approximately $94 million in proceeds. The JV's value is now approaching $500 million. The company is exploring further acquisitions for the JV, including potential contributions of more Healthcare Realty properties.

Healthcare Realty also has additional asset sales and JV transactions under contract or LOI, expected to increase total proceeds to over $1 billion. Most of these transactions are anticipated to be completed in the third quarter, with proceeds funding accretive, leverage neutral share repurchases and existing capital commitments.

Positive

• Expansion of joint venture with KKR, generating $94 million in proceeds
• JV value approaching $500 million
• Additional asset sales and JV transactions expected to increase proceeds to over $1 billion
• Proceeds to fund accretive, leverage neutral share repurchases and existing capital commitments

Negative

• None.

Insights

Financial Analyst

The expansion of Healthcare Realty Trust's joint venture with KKR is a strategic move that strengthens the company's financial position. By contributing $118 million in properties and generating $94 million in proceeds, HR is effectively monetizing its assets while maintaining partial ownership. This approach allows for capital recycling without fully divesting from valuable properties.

The JV's growth to nearly $500 million in value demonstrates significant scale, potentially leading to economies of scale in operations and financing. The company's target of over $1 billion in proceeds from various transactions signals a substantial balance sheet restructuring, which could improve financial flexibility and fund growth initiatives.

Investors should note the company's intention to use proceeds for share repurchases, which could be accretive to earnings per share if executed at attractive prices. However, the "leverage neutral" approach suggests a cautious stance on debt levels, potentially limiting aggressive expansion plans.

Real Estate Investment Specialist

Healthcare Realty Trust's expansion of its JV with KKR reflects a broader trend in the healthcare real estate sector towards strategic partnerships. This move allows HR to unlock value from its existing portfolio while maintaining operational involvement and potential upside.

The approaching $500 million JV valuation suggests a significant portfolio size, which could enhance negotiating power with tenants and service providers. The exploration of additional acquisitions for the JV indicates a growth-oriented strategy, potentially allowing HR to expand its footprint without bearing the full capital burden.

The 79.7% proceeds-to-contribution ratio ($94 million proceeds from $118 million contributed) implies a favorable valuation of the contributed assets. This could signal strong investor confidence in the healthcare real estate market or the specific properties involved, which is positive for HR shareholders.

Corporate Strategy Consultant

Healthcare Realty Trust's expanded JV with KKR demonstrates a savvy capital management strategy. By leveraging partnerships, HR is effectively diversifying its capital sources beyond traditional debt and equity markets. This approach provides flexibility in a potentially volatile market environment.

The company's goal of generating over $1 billion in proceeds through various transactions suggests a comprehensive portfolio optimization effort. This could lead to a more focused, higher-quality asset base and improved returns on capital. The emphasis on "leverage neutral" transactions indicates a balanced approach to growth and financial stability.

The potential for additional HR property contributions to the JV hints at a phased execution strategy, allowing management to adjust based on market conditions and performance. This flexibility could be valuable in navigating economic uncertainties while pursuing growth opportunities.

KKR JV approaching $500 million in value with new asset contributions

NASHVILLE, Tenn., Aug. 26, 2024 (GLOBE NEWSWIRE) -- Healthcare Realty Trust Incorporated (NYSE:HR) today announced it has contributed $118 million of additional properties to its joint venture with KKR, generating approximately $94 million of proceeds. The value of the JV is now approaching $500 million. The Company and KKR are continuing to explore additional acquisitions for the JV, including the potential contribution of more Healthcare Realty properties.

As previously disclosed in July, the Company also has additional asset sales and JV transactions under contract or LOI that are expected to increase proceeds to over $1 billion. The majority of these transactions are expected to be completed in the third quarter, with proceeds expected to fund accretive, leverage neutral share repurchases and existing capital commitments.

“The expansion of our joint venture with KKR shows continued progress towards our goal of generating more than $1 billion of proceeds from asset sale and JV transactions,” stated Todd Meredith, President and CEO. “Our existing joint venture relationships are providing us with proceeds in the current market environment and alternative sources of growth capital over the longer term.”

About Healthcare Realty

Healthcare Realty is a real estate investment trust (REIT) that owns and operates medical outpatient buildings primarily located around market-leading hospital campuses. The Company selectively grows its portfolio through property acquisition and development. As the first and largest REIT to specialize in medical outpatient buildings, Healthcare Realty’s portfolio includes nearly 675 properties totaling approximately 40 million square feet concentrated in 15 growth markets. Additional information regarding the Company can be found at www.healthcarerealty.com.

Ron Hubbard
Vice President, Investor Relations
P: 615.269.8290

In addition to the historical information contained within, the matters discussed in this press release may contain forward-looking statements that involve risks and uncertainties. These risks are discussed in filings with the Securities and Exchange Commission by Healthcare Realty, including its Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Risk Factors,” and in its Quarterly Reports filed thereafter and in the Company’s other SEC filings. Forward-looking statements represent the Company’s judgment as of the date of this release. The Company disclaims any obligation to update forward-looking statements.

FAQ

How much did Healthcare Realty Trust (HR) contribute to its KKR joint venture expansion?

Healthcare Realty Trust contributed $118 million of additional properties to its joint venture with KKR.

What is the current value of Healthcare Realty Trust's (HR) joint venture with KKR?

The value of Healthcare Realty Trust's joint venture with KKR is approaching $500 million.

When are the majority of Healthcare Realty Trust's (HR) asset sales and JV transactions expected to be completed?

The majority of Healthcare Realty Trust's asset sales and JV transactions are expected to be completed in the third quarter of 2024.

How will Healthcare Realty Trust (HR) use the proceeds from its asset sales and JV transactions?

Healthcare Realty Trust plans to use the proceeds to fund accretive, leverage neutral share repurchases and existing capital commitments.