An office building can be close to a hospital and still be mostly an opportunity. At 222 Westchester Avenue in White Plains, New York, Healthcare Realty had a medical building that was 58% occupied and produced about $500,000 in net operating income. The interesting question was what the empty space was trying to tell its owner.
- Healthcare Realty owns the space where outpatient medicine happens.
- Its advantage combines hospital proximity with hands-on building operations.
- A financial reset is testing how much that combination can earn.
The company consulted its local health-system partner about outpatient growth. It then committed $13 million to modernization, within a $20 million total investment including tenant improvements. In its published case study, the building was already 92% leased, with annual operating income projected at $2.5 million. That last number was a forecast. The signed leases were the more immediate evidence.
There is an entire company inside that sequence: ask the provider what it needs, put capital into the address, then find out whether the rent justifies the work. Healthcare Realty’s White Plains example makes an otherwise abstract business unusually legible.
The address is part of the treatment
Healthcare Realty owns, operates and develops medical outpatient buildings. Doctors and health systems are its customers; patients are the people whose journeys give those buildings purpose. Its June 2026 portfolio covered 562 properties, approximately 32.8 million square feet, across 49 American markets. It supplied leasing and property management to 95% of that portfolio.
Think about the distinction between a pleasant office and a useful medical address. A practice needs space that fits its clinical work, but its position relative to a hospital and other providers can also matter. Healthcare Realty concentrates on that relationship. Its leasing team explicitly tries to create a complementary mix of tenants within buildings and across hospital campuses.
The practical offering includes leases, property managers, maintenance engineers and development expertise. A physician group can seek space; a health system can work with the company on a new outpatient facility; a developer can bring a local relationship and work with an experienced capital partner. Its development record exceeds four million square feet and $1.2 billion of investment.
This is specialization through daily work. The company’s operating approach puts its own staff between the tenant and the building’s problems. A maintenance request is a small event. Repeated across hundreds of buildings, responding well becomes part of the argument for renewing a lease.
A $20 million answer to an empty floor
The White Plains case offers a useful discipline for anyone allocating capital. An underused asset does not automatically deserve a renovation. Here, the company first talked to a prospective source of demand: the local health system. The building’s shortcomings and the provider’s expansion needs could then be considered together.
Occupied and leased are different measures. Projected NOI: $2.5M annually, versus about $0.5M before redevelopment; forecast, not a reported result.
The lesson to copy is the order of operations. Validate the use before improving the container. Then separate commitments from results: leased space is not necessarily occupied space, and projected income is not collected income. That distinction keeps an attractive redevelopment story from becoming an excuse to ignore execution.
Healthcare Realty’s broader history shows the attraction of this niche. David Emery led the team that founded the company in 1992. Its 1993 flotation raised $117 million for 21 properties. In 2007, it sold senior living facilities to sharpen its outpatient focus. It had found a particular kind of building it wanted to understand deeply.
The bill for getting bigger
Understanding buildings and financing a large portfolio are separate challenges. Healthcare Realty merged with Healthcare Trust of America in July 2022. Its annual report described both the benefits of clustered properties and the difficulty of closing a transaction while interest rates rose. Scale promised local operating efficiencies. Capital still had a price.
The 2024 accounts make the strain visible: a $654.5 million net loss attributable to common stockholders, approximately $313.5 million in property impairments and credit-loss reserves, and $250.5 million of goodwill impairment. Those figures do not establish one cause of the company’s problems. They do show why a good property category could not settle every corporate question.
“re-establish credibility”
Healthcare Realty’s strategic-plan discussion, July 2025
Peter Scott became CEO in April 2025. The subsequent plan addressed governance, asset management, portfolio selection, capital allocation and debt. The company’s own phrase, re-establish credibility, suggested the size of the assignment. By February 2026, it reported a restructured operating platform, $10 million in corporate and property-level administrative savings, and a dividend reset expected to retain roughly $100 million annually.
The choices involved real trade-offs. In calendar 2025 it sold 70 properties for about $1.09 billion. Closing costs and related adjustments were approximately $77.6 million, with another $11.8 million in seller-financed notes. Selling buildings releases cash and gives up future rent. A lower dividend preserves cash inside the company while paying shareholders less.
What stays with the landlord
Joint ventures offer another route. In its KKR arrangement, Healthcare Realty retained a 20% stake while KKR took 80%. The structure brings outside capital into buildings while preserving an operating role. Healthpeak, a public competitor with outpatient and laboratory properties, pursues its own combinations of ownership and institutional partnerships. Healthcare Realty’s distinction is its concentrated outpatient focus and operating platform.
The second quarter of 2026 provided encouraging operating evidence: comparable-property cash net operating income grew 5.1%, and tenant retention reached 88.5%. Yet the company also reported a GAAP net loss of $0.13 per share. Better property operations and corporate profitability belong in the same conversation.
For a prospective tenant, the useful questions are concrete: which location, which neighboring specialties, which improvements, which lease obligations? For an owner copying the strategy, the conditions matter just as much. Weak provider finances, inadequate demand, construction overruns or expensive debt can overwhelm a good address. Next door is a place to begin the analysis.