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2 Healthcare REITs Stifel Is Buying On Valuation

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Stifel analyst Daniel Bernstein believes the recent market dip has created some big value for two healthcare REITs.

In a new report, Stifel upgrades Healthcare Realty Trust Inc (NYSE: HR) and Healthcare Trust of America (NYSE: HTA) to Buy.


The two REITs that Bernstein focuses on in the report are both medical office building (MOB)-focused REITs. Stifel sees several key reasons why MOB REITs are positioned well for the future.

“We believe the MOB asset class benefits from long-term trends toward hospital employment of physicians and less vulnerability to construction ad reimbursement pressures,” Bernstein explains.

Healthcare Trust of America

The primary reason for the upgrade of Healthcare Trust of America is valuation. Stifel estimates a net asset value (NAV) for the REIT of about $27, a 13 percent premium to its recent price.

In addition, shares are currently priced at only 16.4x forward funds available for distribution (FAD), well short of the REIT’s three-year average multiple of 17.8x.

In addition to the appealing valuation, Stifel the opportunity for more acquisitions in the near future, and loves the REIT’s low-risk balance sheet and low payout ratio.

Healthcare Realty Trust

For Helathcare Realty Trust, Stifel calculates a NAV of $30.50, implying 25.2 percent upside from recent price levels.

Bernstein believes that the REIT’s portfolio is underappreciated and projects 8.1 percent and 10.4 percent FAD growth in 2015 and 2016, respectively.

He notes the REIT’s recent opportunistic refinancing of higher-cost debt and its potential for a dividend increase in the next 12 months.

Stifel believes that the REIT will achieve a payout ratio below 90 percent by the end of the year, which will pave the way for the REIT’s first dividend hike since the Financial Crisis.

Latest Ratings for HR

Jan 2018BMO CapitalDowngradesOutperformMarket Perform
Dec 2017KeyBancUpgradesUnderweightSector Weight
Dec 2017Morgan StanleyMaintainsOverweight

View More Analyst Ratings for HR
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas REIT Upgrades Analyst Ratings Trading Ideas General Real Estate


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