The CEO of healthcare real estate investment trust Ventas, Inc. (NYSE:VTR) recently guest-starred on a CNBC Mad Money segment during which host Jim Cramer gushed about the “booming” demand for healthcare-oriented real estate and Ventas’ prime positioning.
Factors including the nation’s burgeoning senior population, limited senior housing development in the past few years, and constricted financing availability have combined to make Ventas a REIT to be reckoned with, especially considering stocks that have delivered a compound annual return of 32.5% in the last 12 years, said Cramer.
There are obvious risks, though, for healthcare REITs whose tenants are largely senior care facilities, some of which may derive a significant portion of revenue from fluctuating Medicare and Medicaid reimbursements, the host pointed out. And with the Supreme Court’s healthcare reform decision looming large on the horizon, the possible implications for reimbursements were uncertain.
Ventas CEO Debra Cafaro appeared on the show right before the Supreme Court’s Obamacare ruling, but she didn’t seem too nervous about how her company would fare in the aftermath.
“Our leases are structured so that our tenants can weather ups and downs in Medicare reimbursement and still have a cushion between the amount of rent that’s due to us,” Cafaro said, adding that 70% of the REIT’s net operating income comes from private-pay sources.
Written by Alyssa Gerace