Mizuho analysts have hiked their rating on shares of Healthcare Realty Trust to 'buy' from 'neutral' and lifted their price target to $28 from $26. The upgrade is due in part to their optimism about REITs in general but they also note that Nashville-based Healthcare Realty (Ticker: HR) is a better value after its 11 percent year-to-date drop and that its "more granular" approach to business will serve it well going forward.
Avondale Partners analyst Brian Hoffman says Healthcare Realty Trust investors should look for the company to sell a few more properties than previously expected this year. Healthcare Realty execs recently issued $250 million in notes to redeem most of another chunk of debt and plans to borrow about $83 million from its revolving credit line to finish that deal. That, Hoffman says, will lead to 2015 dispositions worth about $100 million rather than $75 million. The analyst has reiterated his 'market perform' rating and $28 price target on the stock (Ticker: HR), which closed Tuesday at $26.75.
Down the hall at Avondale, Richard Close has reiterated his 'market outperform' rating and $33.50 price target on shares of HealthStream following the company's strong first-quarter earnings report. Close says he and his associates have "an upward bias to our estimates throughout 2015, although we note management effectively affirmed guidance despite the beat. We look to gain additional details on timing of investment spend throughout the remaining quarters of 2015." HealthStream shares (Ticker: HSTM) popped 9 percent Tuesday to $29.20.
Healthcare Realty Trust is moving quickly with its $250 million offering of unsecured notes, which it expects to issue late next week. The Nashville-based REIT will use the money to pay off notes maturing in 2017 and will trade an interest rate of 6.5 percent for one comfortably under 4 percent. The new notes will mature in 2025. The transaction will result in the company (Ticker: HR) needing to take a $26.8 million charge to its second-quarter earnings.
Healthcare Realty Trust executives have hired JPMorgan Securities, Barclays Capital and Jefferies to run an offering of 10-year unsecured notes. The Nashville-based company isn't yet specifying a dollar figure but in an SEC filing says it will be less than $334 million, the amount it expects to pay to redeem $300 million worth of 6.5 percent notes that will mature in 2017.
"The redemption of all of the outstanding senior notes due 2017 will require funds in excess of the expected proceeds of this offering and the Company anticipates funding the additional amounts needed from borrowings on its unsecured credit facility and proceeds from the sale of real estate assets through the year," the filing says.
Shares of Healthcare Realty (Ticker: HR) opened Wednesday trading at $26.76 and are down slightly so far this year.
Analysts at Fitch Ratings have lifted their ratings on the debt of Healthcare Realty Trust to BBB from BBB-. The move, they say, reflects the real estate investment trust's shrinking leverage — total debt relative to recurring operating EBITDA has come down to 6.5x from 8.8x at the end of 2010 — and the steady growth of its cash flows.
Similarly, HR has retained 83% of its expiring tenants on average versus 67% for suburban office REITs and with significantly less variation (77% - 89% vs. 51% - 82%) over this same time period. While the magnitude of HR's outperformance has decreased as suburban office fundamentals improve, the low absolute (and relative) volatility is a key rating driver.
KeyBanc analyst Karin Ford has lowered her rating on shares of Healthcare Realty Trust to 'hold' from 'buy,' saying the real estate investment trust's 2015 growth prospects don't look too appetizing and that its 2014 rise of almost 30 percent (Ticker: HR) puts its near fair value. Ford is the second analyst this month to cool the jets on Nashville-based Healthcare Realty: Last week, Brian Hoffman at Avondale Partners said he doesn't see much dividend growth from the company in the coming year.
Brian Hoffman at Avondale Partners likes the long-term prospects for Healthcare Realty Trust, which is set to capitalize on the trends moving more medical care into office and outpatient settings. But Hoffman doesn't think there will be many acquisitions of note in 2015 and, because of that, doesn't see much in the way of dividend growth. That has him staying on the sidelines for now with a 'market perform' rating and a $26 price target. That's about $1 below where Healthcare Realty Trust (Ticker: HR) opened trading this morning.
The directors of Healthcare Realty Trust last week voted to declassify the real estate investment trust's board structure, which now divides the nine-member body into groups of three. If shareholders approve next spring — and there's little reason to believe they won't — all directors will stand for a one-year term from then on.
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