Stock Analysis & Valuation Healthcare Realty Trust Incorporated (HR)

• Previous Close: $16.79
• Sector Valuation Confidence Level: Low

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	19.41	16
Intrinsic value (DCF)	6.37	-62
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Healthcare Realty Trust Incorporated (NYSE: HR) is a leading real estate investment trust (REIT) specializing in outpatient healthcare properties across the United States. The company owns, manages, finances, and develops high-quality medical office buildings and other healthcare-related real estate, catering to the growing demand for outpatient services. As of recent filings, HR's portfolio includes over 200 properties spanning 24 states, totaling approximately 15.5 million square feet. The REIT focuses on properties affiliated with top-tier healthcare systems, ensuring stable occupancy and long-term lease agreements. Operating in the REIT - Healthcare Facilities sector, Healthcare Realty Trust benefits from the secular trend toward outpatient care, driven by cost efficiencies and patient preferences. With a market capitalization exceeding $5 billion, HR is a key player in healthcare real estate, offering investors exposure to a defensive asset class with resilient cash flows.

Investment Summary

Healthcare Realty Trust presents a compelling investment case due to its focus on outpatient healthcare facilities, a segment experiencing strong demand growth. The company’s portfolio is well-diversified geographically and anchored by creditworthy tenants, providing stable rental income. However, investors should note the recent negative net income (-$654M) and high leverage (total debt ~$4.96B), which could pose risks in a rising interest rate environment. The dividend yield (~1.24 per share) may appeal to income-focused investors, but payout sustainability should be monitored given the current earnings deficit. The low beta (0.75) suggests relative stability compared to broader markets, making HR a potential defensive play in volatile conditions.

Competitive Analysis

Healthcare Realty Trust differentiates itself through its pure-play focus on outpatient medical real estate, a niche with high barriers to entry due to regulatory complexities and tenant-specific requirements. The company’s scale (15.5M sq. ft.) and relationships with major healthcare providers strengthen its competitive moat. HR’s properties are often mission-critical for tenants, reducing vacancy risks and supporting lease renewals. However, the REIT faces competition from larger diversified healthcare REITs and private equity investors entering the space. Its relatively high leverage compared to peers could limit flexibility in acquisition-driven growth. The shift toward outpatient care favors HR’s business model, but pricing power may be constrained by tenant sensitivity to healthcare reimbursement pressures. The company’s ability to maintain high occupancy rates (~90%+) and secure long-term leases will be key to sustaining its competitive position.

Major Competitors

• Welltower Inc. (WELL): Welltower is a larger, diversified healthcare REIT with a global portfolio including senior housing, outpatient, and post-acute properties. Its scale and international presence give it an edge in capital allocation, but HR’s outpatient focus allows for deeper specialization. Welltower’s recent performance has been stronger, but it carries higher exposure to senior housing volatility.
• Ventas, Inc. (VTR): Ventas operates across senior housing, medical office, and research properties. Its diversified model provides stability but lacks HR’s concentrated outpatient focus. Ventas has faced challenges in senior housing occupancy, whereas HR’s medical office assets are more resilient. However, Ventas’s larger size may offer better financing terms.
• Physicians Realty Trust (DOC): A direct competitor in medical office buildings, Physicians Realty Trust has a similar strategy but a smaller portfolio. DOC’s lower leverage profile is a strength, but HR’s larger scale provides better tenant diversification and operational efficiencies. Both face similar regulatory and reimbursement risks.
• Medical Properties Trust, Inc. (MPW): MPW focuses on hospital real estate, a more volatile segment than HR’s outpatient assets. MPW’s international exposure and higher yields attract investors, but its tenant concentration risks (e.g., Steward Health) are greater than HR’s diversified tenant base.