Medical Office
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“We seek investments with partners

who desire a long-term relationship

and share the same goals. We avoid

 investments motivated only by

short-term, transactional objectives.”

B. Douglas Whitman

Chief Operating Officer

Healthcare Realty Trust's approach to investing differs from that of typical real estate firms. We recognize that health systems have many choices in selecting a real estate company to acquire or construct a building. We believe our focus on medical office and outpatient facilities, our access to capital and long-term investment horizon benefit health systems and differentiate Healthcare Realty Trust from other firms.

As of June 30, 2008, Healthcare Realty Trust's real estate portfolio was comprised of six different facility types, located in 24 states, totaling approximately 10.8 million square feet.  The Company's investments totaled approximately $1.8 billion in 181 real estate properties and mortgages, excluding assets classified as held for sale and including investments in three unconsolidated limited liability companies.  The Company’s portfolio is comprised predominantly of diverse outpatient facility types, including medical offices, ambulatory and surgery, physician clinics and other specialty types.

Hospitals are constantly pressured to improve acute care facilities, technology, and services, limiting their health system expansion plans by the many other uses for their capital.  As a result, health systems have become increasingly interested in recruiting third-party investors to build and own medical office/outpatient facilities on or adjacent to hospital campuses.  Healthcare Realty’s experience in constructing more than $500 million worth of medical real estate facilities enables us to focus on build-to-own developments in these growing markets where medical office and outpatient modalities are in high demand.

We fund acquisitions and developments strictly from internal capital generated at the corporate level - as opposed to involving intrusive third-party lenders or equity partners on each individual transaction. Unlike typical real estate firms who are beholden to lenders, our use of internal capital benefits health systems because:

·         We can finalize acquisitions without any financial contingencies.

·         We can begin construction on new facilities without any pre-leasing thresholds.

·         We can expedite investments without involving any third-party capital sources in negotiations or decisions.

·         We can improve health systems' accounting by accepting shorter operating leases (three to five years) for any space occupied by the system, as opposed to longer capital leases (10 to 15 years), as typically required by lenders.

Healthcare Realty's diverse capital sources and investment-grade credit ratings assure that we have ongoing access to capital as needed for new investment opportunities and future capital improvements.

The Company's financial autonomy offers flexibility in structuring investments, resulting in straightforward ownership models that allow health systems to redeploy their resources away from ancillary medical real estate, while preserving the operational controls they desire.

Organized as a real estate investment trust (REIT) under the United States Tax Code Act, Healthcare Realty Trust must distribute at least 90% of its income to shareholders. In order to meet shareholders' expectations of reliable and growing dividends, we seek to establish long-term investment relationships that generate stable, lasting income.

The tax code also discourages the Company from re-selling or 'flipping' a building, and actually requires the Company to earn its investment returns strictly from rental income. Unlike most real estate investors who adhere to the "buy low, sell high" approach and expect to earn most of their returns through fees, commissions and capital gains, our focus is exclusively on generating stable operating income over a long period of time. Health systems can be comforted knowing that tenants will not face the anxiety and disruption of dealing with multiple landlords and property managers because our buildings will not be sold.

With the expectation of maintaining a long-term presence on or near hospital campuses, Healthcare Realty Trust seeks to foster ongoing relationships with health systems and  physicians that result in additional investment and management opportunities. We provide a source of capital for acquiring existing facilities, developing new facilities, and also maintaining and expanding facilities as they age and compete with newer buildings for tenants.

Health systems can realize these benefits by taking advantage of Healthcare Realty Trust's financial stability, often without investing their own capital.