Healthcare Trust of America, Inc.

  • HTA’s Chief Executive Officer Has A History of Failure And Non-Shareholder Friendly Outcomes: At Spruce Point, we like to follow executives who have destroyed shareholder value in the past as this pattern often repeats itself. HTA’s CEO and Chairman Scott Peters has been linked to multiple bankruptcies and liquidations (Grub & Ellis, NNN Realty Advisors, G REIT, T REIT, and Golf Trust of America).  Furthermore, we highlight a corporate and personal web of inter-relationships that links both HTA and CEO Peters to multiple bad players in the REIT industry, including Tony Thompson who was barred by FINRA and Nick Schorsch, Former Chairman of American Realty Capital Partners (ARCP, now VEREIT (NYSE: VER)), whose firm manipulated non-GAAP results and had its CFO convicted of fraud.
  • HTA’s Existence Began As A Non-Traded REIT Prior To A Direct Listing On The NYSE: Spruce Point has had many successes shorting companies that have taken back-door or non-traditional listing channels to come public, most notably the early China scams. Within real estate, the Non-traded REIT (NTR) industry is known to be a conflict-ridden business.  NTRs are sold to retail investors through broker-dealers who earn egregious commissions (upwards of 10%).  In general, for every $10 share purchase, about $1.50 is spent on up-front fees and acquisition expenses, leaving only $8.50 to be invested.  After Scott Peters (and his executive team) scraped fees from raising $2.2bn under the NTR umbrella, management listed the Company on the NYSE in 2012 without raising capital via a traditional IPO. In doing so, we believe public investors may not have received the benefits from a rigorous underwriting and due diligence IPO process.
  • In Our Opinion, HTA Is Likely Manipulating Its Quarterly Same-Property Cash Net Operating Income (SPNOI) Results: We have conducted a statistical analysis of quarterly SPNOI performance, and believe it is highly likely that this measure is being managed in a manner to show consistent results.  In our analysis, we compared HTA’s quarterly SPNOI results with its Medical Office Building (MOB) peers. HTA demonstrates the least volatility (i.e. lowest standard deviation) by a significant margin.  We point to potential accounting maneuvers and culprits of how the comparisons have remained so consistent throughout its public history, and share scary similarities of reported results with the Brixmor accounting scandal.
  • We Can’t Reconcile HTA’s Same-Property NOI Margin Profile: Same-property revenues have grown on avg. by 1.9% and same-property expenses are down by 1.1% since 2013, yet, there is no commensurate SPNOI margin expansion.  We provide an illustration of how we believe HTA’s margin profile should be expanding according to its reporting, and illustrate why the math doesn’t appear to work. HTA may be achieving its consistent SPNOI results though uneconomic means: e.g. entering into expensive long-term fixed-price contracts, and/or selling properties at unattractive prices.
  • Serious Concerns With The CFO And Accounting Function: Despite CFO Robert A. Milligan claiming to have worked for Bank of America/ML from July 2007 – Jan 2012 as a VP in corporate banking advisory, there is no FINRA record to evidence his employment. Milligan’s public profile also says he is CFO/Treasurer/Secretary, yet he also signs HTA’s SEC filings as Principal Accounting Officer (he is an MBA, not a CPA). HTA has a named Chief Accounting Officer, David Gershenson, as part of its executive team. SEC rules state that the Chief Accounting Officer must sign the 10-K filing; why hasn’t he done so? HTA’s accounting function appears in disarray with a majority of the staff sitting in South Carolina, two thousand miles away from its executive office in Scottsdale, Arizona. Our analysis shows that a majority of HTA’s accounting team has been in place less than one year, suggesting significant internal turnover and an inexperienced team overseeing the numbers.Download the report to read more…
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