Healthcare REITs and the investors whose money they control could stand to benefit from certain provisions under the Affordable Care Act, especially now that the Supreme Court upheld the controversial healthcare reform law’s constitutionality, says a Seeking Alpha article.
Healthcare REITs generally provide investors with a method of investing in the hospitals, rehabilitation facilities, and senior health retirement centers that will service the nation’s healthcare needs. Most healthcare REITs manage the property and are merely landlords to the hospitals and related facilities, but added business for those hospitals should mean that hospitals may more easily pay their rent, including handling coming rent increases, and also potentially expand their facilities.
For several decades, medical costs have increased at a rate that has outpaced inflation. If the trend continues into the future, it can be expected that investments in the businesses that service healthcare might also outpace inflation. Being the landlord to such medical services facilities may be a beneficial position. Of course, the current regulatory and insurance landscape does present concerns within the American healthcare industry, and potential risks to investors. Nonetheless, if a medical center does survive, it will have to pay its landlord rent.
Healthcare REIT exposure should also help increase the average portfolio’s yield. Several of the largest publicly traded healthcare REITs offer yields well above the market’s average. Additionally, beyond the income stream that the REIT business requires, medical real estate is a highly focused industry that differs from both residential and most traditional commercial real estate, making it a potentially growing and low-correlation asset allocation.
The articles goes on to explore recent performance numbers for several publicly traded healthcare REITs with strong involvement in the seniors housing and care industry: HCP, Inc. (NYSE:HCP), Health Care REIT, Inc. (NYSE:HCN), Senior Housing Properties Trust (NYSE:SNH), and Ventas, Inc. (NYSE:VTR).
“These healthcare REITs may provide investors with both competitive levels of immediate income and also an opportunity to invest in the probable future growth of healthcare services throughout the nation,” says the article.
Written by Alyssa Gerace