SCOTTSDALE, AZ-It looks as if the good run for healthcare-focused real estate investment trusts is not coming to an end anytime soon. As of April 12, all of the US equity REITs – not just healthcare – had raised $18.3 billion in new equity and debt, according to the research firm SNL Financial. Of that, the country’s healthcare REITs accounted for 12.2% of the total, or about $2.24 billion.
When considering that the healthcare real estate sector is a fraction the size of the office and retail markets, the comparatively large amount of capital raised by the healthcare-focused REITs suggests that investors remain quite bullish on the sector, analysts say.
The REIT sector raising the most capital during the period was specialty, with about $4 billion, followed by office, $3 billion; retail, $2.6 billion; hotel, $2.5 billion; and, as noted above, healthcare at $2.2 billion.
And why shouldn’t the healthcare REITs attract so much investor attention? Healthcare has been among the top-performing REIT sectors throughout the past several years – and that trend continued through Q1 2013.
The most recent S&P Dow Jones Global Real Estate Report, released April 18, found that healthcare REITs led the way with a Q1 return of nearly 14.4%, far outpacing the broader REIT index return of 7.9%. Healthcare REITs also outperformed the office (12.5%), hotel/resort/leisure (14.3% ) and industrial (10.9%) sectors, S&P reported.
Major capital raises by healthcare REITs so far this year have included the March 21 initial public offering (IPO) of Chicago-based Aviv REIT Inc., which raised $303.6 million as well as issuing a variety of other equity and debt offerings. In the common equity category, some of the larger capital raises by healthcare REITs this year have included about $590 million by Duke Realty Corp. and $273.7 million by Senior Housing Properties Trust, both of which took place in January. In February, Medical Properties Trust Inc. raised $180 million.
In the senior debt category, Ventas Inc. led with way with a $500 million offering in February. Other large healthcare REIT debt offerings in 2013 have included locally based Healthcare Trust of America Inc. and Healthcare Realty Trust Inc., which raised $300 million and $250 million, respectively, both in March.
So what are healthcare REITs going to do with all that cash? The obvious answer is: buy more properties, and perhaps each other. Last year, some of the major mergers and acquisitions among healthcare REITs included the $1.9 billion acquisition of Sunrise Senior Living by Health Care REIT Inc., as well as Ventas’ separate acquisitions of Codgell Spencer Inc. and Nationwide Health Properties Inc. for a total of about $8 billion.
The strong long-term prospects for HRE, combined with the fact that healthcare REITs continue to trade at high premiums to net asset value has some securities analysts predicting that we will see further consolidation in 2013.
Murray W. 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. Disclaimer: The author has no financial position in any of the companies mentioned and this article does not constitute an investment recommendation.