S&P Lowers Healthcare REIT's Credit Rating; Outlook Upgraded to Stable

NEWPORT BEACH, CA-Nationwide Health Properties had its corporate credit rating lowered by Standard & Poor’s Monday from triple B to triple B minus, reflecting a modest increase in the proportion of revenues derived from troubled operators.

The locally based $1.5-billion real estate investment trust also had the ratings on its $727.9 million in outstanding securities lowered. However, the company’s outlook has been revised proportionately from negative to stable.

Comprised of 330 investments (88% equity and 12% mortgage), the REIT’s portfolio is spread over 37 states and 59 operators. The health care-focused portfolio is diversified: 44% of its investments are in assisted-living facilities, 15% in continuing-care retirement facilities and 41% in nursing homes.

Nationwide expects to take a modest number of facilities back from troubled operators, which could have a slight impact on earnings. Although the company’s financial position has weakened, it is still moderately conservative due to a manageable debt profile and limited near-term capital requirements.

Most of Nationwide’s operators remain current on their monthly rent/interest obligations, and appear to be working to reduce costs in response to reduced Medicare reimbursement rates. With little breathing room on its line-of-credit and limited access to equity capital, Nationwide has no plans to fund new development beyond present commitments of less than $1 million.