Healthcare REITs: Don’t Pull The Plug, Yet

Summary

  • Healthcare REITs are ground-zero of the coronavirus pandemic, and no healthcare land sub-sector is immune from the many near-term and long-term consequences.
  • It’s not the flu. Data indicates that older cohorts – particularly home patients in several Northeastern states – have accounted for a disproportionate share of total fatalities.
  • Critics have questioned the govt response to the coronavirus. Recently reversed policies in several states were particularly devastating to home residents, but lessons are learned the hard way.
  • Senior housing, skilled nursing, and hospital REITs are all facing record-low occupancy rates, while medical office properties are not any longer a secure haven. The pandemic significantly accelerated the adoption of telemedicine.
  • We believe that the long-term outlook could also be better than feared, however. Despite the headwinds, healthcare REITs reported near-perfect rent collection and dividends have remained relatively untouched.

Healthcare land Sector Overview

Healthcare REITs are ground-zero of the coronavirus pandemic, and no healthcare land sub-sector is immune from the many near-term and long-term consequences. Within the Hoya Capital Healthcare REIT Index, we track all 18 healthcare REITs, which account for roughly $110 billion in market price . one among the higher-yielding and more defensive property sectors, Healthcare REITs comprise 10-12% of the broad-based “Core” REIT ETFs. There are five sub-sectors within the healthcare REIT category – senior housing, skilled nursing, hospital, medical office, and research/lab space – each of which have distinct near-term and long-term risk/return features.

Healthcare REITs tend to specialise in one property type and are led by the “Big Three” healthcare REITs: Ventas (VTR), Welltower (WELL), and Healthpeak (PEAK). These “Big 3” REITs hold a reasonably diversified portfolio across the healthcare spectrum but focus totally on the senior housing sub-sector. Other players within the senior housing space include New Senior (SNR), National Health (NHI), and Diversified Healthcare (DHC). On the general public pay side, the skilled nursing sub-sector includes Omega Healthcare (OHI), Sabra Health Care (SBRA), CareTrust (CTRE), and LTC Properties (LTC), while there’s one hospital-focused REIT, Medical Properties (MPW). The medical office sub-sector includes Healthcare Realty (HR), Healthcare Trust (HTA), Universal Health (UHT), Physicians Realty Trust (DOC), Community Healthcare (CHCT), and Global Medical REIT (GMRE). Alexandria Realty (ARE), meanwhile, is that the lone REIT focused exclusively on the research and lab space.

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