SCOTTSDALE, AZ-For those investing in real estate investment trusts focused on healthcare, 2012 was a good year. In fact, according to the business research and information service SNL Financial, healthcare REITs outperformed all other REIT sectors last year, racking up a total return of 25.9%.
In aggregate, healthcare REITs performed better than those concentrating on “the four main food groups” of commercial real estate: office: office, industrial, retail and multi-family. Healthcare REITs also outperformed the S&P 500, which had a total return of 15.7% last year, SNL found.
Some other well-performing REIT sectors in 2012 were shopping centers, with a total return of 23.9%; industrial, 23.8%; malls, 22.4% and self-storage, 19.9%.
Although only publicly-traded REITs were included in SNL’s performance data, the strength of the healthcare REITs certainly bodes well for the healthcare real estate industry in general. Many analysts and investors have become increasingly enamored with the sector, which should continue to fuel rising demand.
“I really like the Health Care REITs,” Brad Thomas of investor website TheStreet.com wrote recently. “The growing sector – fueled by The Affordable Care Act and the expected increase in utilization of health services – will continue to be a durable and defensive REIT class.”
Three healthcare REITs that Mr. Thomas especially likes are Medical Property Trust Inc., Omega Healthcare Investors Inc. and Healthcare Trust of America Inc.
Medical Properties Trust, headquartered in Birmingham, AL, is a “pure play” hospital investor that has returned more than 58.5% during the past 12 months and has a dividend yield of 5.6%. Hunt Valley, MD-based Omega, which invests in long-term care facilities, delivered a 38.9% total return during the past 12 months and pays the highest dividend yield in the sector of 6.4%, as of Feb. 19. HTA is a pure-play MOB investor that has returned more than 26% since it went public in June 2012, and has a dividend yield of just over 5%.
Thomas said he expects patient demand to increase significantly when an additional 35 million to 45 million insured patients “make their way into the buildings occupied by the healthcare operators.” In turn, that will drive demand for medical office buildings (MOBs), hospitals, senior living facilities and other HRE properties, he predicted.
Added Thomas: “People don’t tend to change their healthcare spending patterns, regardless of economic conditions.” That has a tendency to soften the highs and lows that the sector experiences during economic cycles. As a result, many investors view healthcare REITs as an inflation hedge and an appropriate choice for retirement accounts.
Disclaimer: The author has no financial position in any of the stocks mentioned and this article does not constitute an investment recommendation.
Murray Wolf is the Founder and Publisher of Healthcare Real Estate Insights™, the nation’s first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.