NASHVILLE - Healthcare Realty (NYSE:HR) Trust Incorporated (NYSE:HR) has announced a strategic joint venture with global investment firm KKR & Co. Inc. (NYSE:KKR), focusing on the ownership and investment in medical outpatient buildings. The collaboration will see Healthcare Realty contributing a seed portfolio valued at $383 million, resulting in proceeds of approximately $300 million.
Under the terms of the agreement, Healthcare Realty will transfer 12 of its existing properties into the joint venture, which are valued at $382.5 million and represent a capitalization rate of about 6.6%. These properties, which are 98% occupied, span 762,399 square feet across seven top U.S. markets, primarily located on or adjacent to leading hospital campuses.
KKR is set to make an equity contribution equivalent to 80% of the value of the properties, while Healthcare Realty will retain a 20% interest and manage the joint venture. Moreover, KKR has committed up to $600 million to pursue further acquisitions or contributions of high-quality stabilized assets, potentially expanding the joint venture's value to over $1 billion.
Todd Meredith (NYSE:MDP), President and CEO of Healthcare Realty, expressed enthusiasm about the partnership, indicating a focus on repurchasing stock on a leverage-neutral basis in the short term, with the possibility of further property contributions or acquisitions depending on market conditions.
Peter Sundheim, Managing Director at KKR, highlighted the high quality of the portfolio and the firm's anticipation for new investments, especially during the current deleveraging cycle affecting real estate, including sectors with strong long-term fundamentals.
The property contributions to the joint venture are expected to be finalized throughout May and June, subject to customary closing conditions. Eastdil Secured LLC and BlackBirch Capital acted as financial advisors to Healthcare Realty, with Latham & Watkins LLP providing legal counsel. KKR was advised by Newmark’s Healthcare Capital Markets Group and Simpson Thacher & Barlett LLP.
The formation of this joint venture is based on a press release statement and involves standard industry risks, as detailed in Healthcare Realty's SEC filings.
InvestingPro Insights
As Healthcare Realty Trust Incorporated (NYSE:HR) embarks on a strategic joint venture with KKR & Co., investors may find the following InvestingPro Data and InvestingPro Tips valuable in assessing the company's current financial health and market position:
InvestingPro Data:
- Market Cap (Adjusted): $5.74B USD
- Dividend Yield as of the latest data: 8.33%
- Revenue Growth over the last twelve months as of Q4 2023: 44.01%
InvestingPro Tips:
- Healthcare Realty has maintained dividend payments for 32 consecutive years, indicating a strong commitment to returning value to shareholders.
- Despite challenges, the company's high shareholder yield is a testament to its focus on shareholder returns.
These insights suggest that Healthcare Realty has a robust revenue growth trajectory and a notable history of dividend reliability. While analysts do not anticipate the company to be profitable this year, the substantial dividend yield may appeal to income-focused investors.
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