Healthcare Realty Trust Expands JVs to Boost Business

Over the last few weeks, Healthcare Realty Trust has discussed the progress two of its joint ventures have made — one with KKR and another with Nuveen.

In late August, Healthcare Realty said that the joint venture with KKR was approaching $500 million in value. The investment trust finished contributing $118 million in additional properties, generating about $94 million in proceeds. Plus, two companies are looking for additional acquisitions.

Healthcare Realty had previously disclosed additional asset sales and JV transactions under contract or letter of intent that would increase proceeds to more than $1 billion. The transactions are expected to close in the third quarter, which should mean by the end of September.

The Nuveen JV also expanded, bringing year-to-date proceeds to about $700 million. Healthcare Realty explained on September 3, 2024, that it had contributed eight properties worth $193 million to the 80/20 JV. According to Healthcare Realty, the value of JV was more than $600 million.

Year-to-date, Healthcare Realty completed $800 million in joint venture and asset sale transactions, generating about $700 million in proceeds at a roughly 6.6% cap rate. In this JV, there are also asset sales and JV transactions under contract or LOI that will generate more than $1 billion in capital.

During an August 2, 2024, earnings call, Healthcare Realty President and CEO Todd Meredith said, “In terms of capital allocation, we expect to generate more than $1 billion of proceeds from completed or planned JVs and asset sales. Our new JV with KKR is already growing, and we recently announced an expansion of our existing JV with Nuveen. We expect about 70% of total proceeds to come from asset contributions to these JVs.”

He said they had been repurchasing almost $300 million in stock at discounted levels, at an average implied 7.5% cap rate. “With JV contribution and asset sale cap rates at 6.6%, this equates to 90 basis points of positive spread or well over 100 basis points, including JV fees,” Meredith said.

In early August, JV contributions and asset sales had generated $400 million of proceeds, year to date.

“For the year, we expect over $1 billion in total JV and asset sale proceeds,” said CFO James Christopher Douglas. “This will fund $200 million of existing capital commitments and $800 million of combined debt repayment and share buybacks. The $800 million of capital allocation proceeds are expected to generate over $0.01 a share of accretion in 2024 and over $2.50 annualized.”