REITs, or “real estate investment trusts,” are a hot topic in the healthcare finance industry. While some caution(and have done so for years) that they can’t maintain their current rapid growth rate, healthcare REITs seem to continue to do just that: grow and expand.
Healthcare REIT Record Public Offering
This past week, for example, Health Care REIT (HCN)’s record public offering was a hot topic. The company raised around $1.5 billion overnight. The raised funds will contribute more than half of the funding for HCN’s ambitious first-quarter investments, a planned $2.2 billion, compared with $3.7 billion invested in all of last year. Industry eyes are watching the international REIT to see if it can maintain its consistent and substantial growth.
Cautious Optimism When it Comes to REITs
Over the past few years, healthcare REITs have performed extremely well. The increased demand and relative stability of senior healthcare housing during economic downturns have been two contributors to this growth. However, as noted above, the question for many remains: how long will it continue? The trading trends of REITs has shown some fear on the part of REIT investors.
Most commentators attribute this fear to the improvement in the U.S. economy, and more specifically to the anticipation of what seems to be an imminent rise in interest rates from the Federal Reserve. However, a recent Forbes article pointed out that the fears are perhaps overblown for at least two reasons: (1) interest rates probably won’t rise a significant amount; and (2) for at least the past 25 years, REITs have historically done well during credit tightening cycles.
Brookdale Contemplating Breaking off Property Holdings into REIT
Simultaneously, there has been a lot of buzz over whether Brookdale Senior Living will split its real estate ownership off from its core operations. The company has seen more bad news than good this year, as it has encountered numerous hiccups in implementing the changes associated with the 2014 merger with Emeritus Senior Living. Among those challenges is a loss of over $100 million in the last quarter of 2014.
Some Brookdale shareholders have begun pressuring the company to tap into the value of its real estate by partitioning it off into a REIT. If it does decide to pursue this course of action, the consensus is that healthcare REITs are interested in getting a piece of the pie. Brookdale itself has been as wishy-washy as the Federal Reserve as to whether it will cave to the pressure it has been receiving. However, the company’s CEO has hinted that if it does decide to pursue the REIT route, it will likely wait until the road bumps in its merger have been overcome and it has begun to operate at a profit.
Senior Housing and Healthcare Finance Can Be Complicated, We Can Help
If your senior housing facility is in need of an influx of capital, or might benefit from refinancing with more favorable loan terms, contact Cambridge Realty Capital today to discuss your options, which range from traditional loans to joint ventures.