Health care-focused real estate investment trusts are looking beyond U.S. borders for opportunities to expand, hoping to diversify their portfolios in a highly competitive domestic market. And they’re finding that international investments are providing more stable environments for real estate expansion.
“We’re focusing on stable economies with well-developed health care systems and those that have private pay systems — a reliable capital source,” says Vince Cozzi, chief information officer at Lillibridge, a Ventas company. Ventas, Inc. (NYSE:VTR) recently became the largest health care REIT in the country following a $900 million agreement to purchase 29 Canadian independent living communities from Holiday Retirement.
“Our growth internationally is an extension of what we’re already doing [in the U.S.],” Cozzi said during a panel discussion at Tuesday’s Healthcare Real Estate Summit hosted by Bisnow, a commercial real estate events producer. The event brought senior housing leaders and health care providers to Chicago to discuss trends in the real estate market.
Like Ventas, Health Care REIT (NYSE:HCN) has expanded its senior living arm internationally, with properties in Canada and the United Kingdom, and has more international properties in the pipeline. The REIT announced in May its plan to acquire approximately $414 million of senior housing and medical office properties by the end of the second quarter, $23 million of which would be invested in Canadian senior housing properties.
“It’s an extension of who we are — stable, well-occupied, well-run senior housing properties,” said Mike Noto, senior vice president of the Management Services Group at Health Care REIT. “But we don’t view it any differently than the in-borders investments other than the fact that we’ve added a tremendous tax department.”
Health Care REIT says it sees a specific opportunity outside the U.S. in senior housing, versus its other property types.
“We’ve limited our investments beyond the borders to senior housing,” Noto said.
Other REITs are also looking to capitalize on the benefits of international expansion, including Medical Properties Trust (NYSE:MPW), which currently has a range of health care facilities in Germany, including acute and long-term care hospitals, inpatient rehabilitation hospitals and other medical office buildings (MOBs).
For MPT, locations outside the U.S. not only create portfolio diversification, but also provide more cost-effective real estate as the U.S. experiences health care reform and a recovering economy.
“I would argue that a more stable reimbursement system, a more stable political environment and a government less in debt do not push you toward a premium in the pricing department,” said Frank Williams, MPT senior vice president and senior managing director of acquisitions. “I think there are health care real estate acquisition opportunities across the globe.”
These opportunities, he says, go beyond Europe and include Central America, South America and Australia, among other countries.
“For any of us it’s really about being disciplined in our investment strategy and where we see the right relative returns,” Cozzi said. “For [Ventas] we think one of the big benefits of being a large diversified REIT is that we can invest in a range of markets.”
Written by Emily Study
Companies featured in this article:
Health Care REIT, Lillibridge, Medical Properties Trust, Ventas
