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Healthcare Trust of America’s Performance in Comparison to Its Peers

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Peer valuation

Healthcare Trust of America (HTA) is the leader in the US medical office sector. HTA has the greatest number of mobile office buildings in terms of gross leased assets at 22.9 million square feet. HTA is followed by Ventas (VTR), HCP Inc. (HCP), and Welltower (HCN) at 19.4 million square feet, 18.2 million square feet, and 17.3 million square feet, respectively.

The price-to-FFO[1. funds from operation] multiple can be used for REITs, as this ratio makes multiple adjustments to help value REITs. HTA has a price-to-FFO multiple of 19.2x and in comparison to its peers, HTA is trading at a premium. Its peers have ratios of:

HTA has earnings per share (or EPS) of $0.33 and a PE (price-to-earnings) ratio of ~111.0x. Its peers have the following earnings per share:

Its peers have the following PE ratios:

HTA comprises 0.69% of the Vanguard Real Estate Index ETF (VNQ).

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REITs in 2018

The Tax Cuts and Jobs Act, which was passed in December 2017, slashed corporate tax rates. This tax cut may make REITs less attractive in comparison to other companies. REITs are tax-exempt entities and are immune from the benefits of tax cuts.

The Federal Reserve has hinted that it’s targeting at least three rate hikes in 2018. Because REITs are often considered an alternative to bonds, rate hikes would offer investors similar yields with reduced risk. The dividend yield expectations also increase when interest rates rise.

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