Healthcare real estate investment trusts (REITs) investing in senior housing and medical office building acquisitions are continuing to outpace other REIT categories in raising capital with record-setting numbers through mid-year 2012, according to data compiled by the Healthcare Capital Markets group at Jones Lang LaSalle.
Capital raised by healthcare REITs through the middle of 2012 set a record at more than $7.5 billion, outpacing previous strong record years, says JLL.
Even though 2011 was widely known as the “Year of the REIT,” capital raised halfway through 2012 totaled more than 65% of the $11.3 billion raised the previous year, and 80% of the $9.2 billion in capital healthcare REITs raised in all of 2010.
“The ability of healthcare REITS to raise debt and equity capital with attractive pricing supports aggressive, accretive acquisition programs and correlates directly with the market-pacing performance of this investment type,” said Mindy Berman, Managing Director of the Healthcare Capital Markets group at Jones Lang LaSalle. “The safe haven of healthcare real estate continues as it produces superior results across the board.”
REITs investing in the healthcare and senior housing sector are outpacing capital raise by REITs in other property classes. Despite representing only 13% of REIT market value, healthcare REITs raised 20% of all REIT capital year-to-date in 2012.
Healthcare-related real estate “comes as close to being ‘recession-resistant’ as a sector can get,” said Berman, as investments in senior housing and medical office buildings are driving superior and stable returns.
Looking at a wide variety of metrics, healthcare REITs are the top income-producing property type and produced current average dividend yields of 4.6%. By comparison, industrial REITs produced a 3.5% yield, while office and apartment REITs produced yields of 3.3% and 2.8%, respectively.
Another index to consider is the healthcare REIT composite, which has produced a total return of 84% since the beginning of the recession, compared to 34% for the US REIT Composite and 4% for the S&P 500.
Overall, the market capitalization of all REITs is $516 billion, according to JLL, and with an approximately $66 billion market capitalization, public healthcare REITs represent nearly 13% of the entire REIT pool. The healthcare segment represents the single largest property type after retail, office, and industrial and residential property.
“People invest in the REITs because of the returns they produce,” said Berman, referencing healthcare REITs’ “incredible access to cash.”
That, she continued, leads to more equity and lower cost of debt for acquiring additional properties. “We don’t see that cycle ending anytime soon,” Berman said.
Written by Alyssa Gerace