“Recession Resistant” Health Care REITs Raise $22.5 Billion

Healthcare Real Estate Investment Trusts (REITs) are gaining steam as a property sector, having raised a total of $22.5 billion in the 18 month period ending June 30, a recent Jones Lang LaSalle report states.

And in spite of the scale of the sector, healthcare real estate has only marginal penetration by real estate investors, the company says.

“Interest in healthcare real estate investment has grown over the last two years based on the superior performance of this asset class during the downturn,” said Mindy Berman, managing director of capital markets in Jones Lang LaSalle’s Healthcare Capital markets group. “The asset type has proven recession-resistant and we expect this asset class will continue to outpace all other product types as the strongest real estate sector if the economic malaise continues to plague the United States.”

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With the estimated value of all healthcare real estate assets in the U.S. totaling $700 billion, the report states, public REITs hold 15% of the product in the market. “While REITs continue to aggressively acquire healthcare assets, a swell of new investors are maneuvering to purchase healthcare real estate,” the company says.

In terms of the $22.5 billion capital raise, the total comprises $17.4 billion in equity and debt capital, with non-listed healthcare REITs raising an additional $5.1 billion of capital during the same 18 months for a total of $22.5 billion for healthcare REITs.

“This is a disproportionate share of capital raised by healthcare REITs, as compared with non-healthcare REITS, added Joe Euphrat, managing director of Jones Lang LaSalle. “This reflects both a combination of the attractiveness of performance of healthcare real estate and prospective capital requirements that healthcare systems face.”

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The top investors in medical properties year to date were the non-listed REITs, Jones Lang LaSalle reports. The three major REITS including Grubb & Ellis Healthcare REIT II, Healthcare Trust of America and American Realty Capital Healthcare Trust acquired 55 properties in total, which is more than a third of all medical office assets trading hands during the period.

Jones Lang LaSalle indicates that healthcare REITs are the top income producing property type among REITs, producing current average dividend yields of 5.3%.

Written by Elizabeth Ecker