JMP Downgrades Healthcare Realty Trust To Market Underperform

Although Healthcare Realty Trust Inc HR management has taken steps to lower leverage, it remains above industry averages and could require additional equity sales, JMP Securities’ Peter L. Martin said in a report. He downgraded the rating for the company from Market Perform to Market Underperform, while establishing a price target of $29.

Management’s portfolio strategy, implemented over the past few years, had boosted the percentage of on-campus affiliated assets and Healthcare Realty Trust’s lowered leverage. Analyst Peter Martin said, however, that leverage continued to be high and may call for equity sales.

Meanwhile, investment spreads had tightened on account of stiff competition for quality MOB assets. This limits Healthcare Realty Trust’s FFO and dividend growth relative to its peers, Martin said.

Above Fair Value

Healthcare Realty Trust’s shares have gained 14.9 percent over the last 90 days, versus a 2.1 percent gain in the S&P 500 and an 11.3 percent gain in the Healthcare REIT sector group. The outperformance of the Healthcare REIT sector had been driven by growing macroeconomic and geopolitical concerns, which pushed investors towards defensive options.

Healthcare Realty Trust’s shares had outperformed the broader Healthcare REIT sector due to “fundamental concerns in other post-acute asset classes, such as SNF and Senior Housing.” The company’s shares were currently trading at above their fair value, the analyst added.