Chicago-based real estate investment trust Ventas Inc. (NYSE:VTR) is “looking hard” at hospital real estate as a new investment sector, CEO Debra Cafaro said in an interview with Crain’s Chicago Business.
Public companies only own 10% of the $1 trillion, “highly fragmented” healthcare real estate market. Cafaro expects a continued transfer of properties from the private sector into public hands, she said, and Ventas will “for sure” be involved.
Hospitals are a “really interesting” new sector Ventas will consider to further diversify its portfolio, which includes medical office buildings and senior housing and care properties.
“[Hospitals are] one of the largest sectors, and there is tremendous cost pressures on hospital systems—even the best ones,” Cafaro tells Crain’s. “They own literally cities of real estate. At the same time, their capital sources are less plentiful and more expensive, so they are looking for other sources of capital. That’s our sweet spot.”
In 2010, Ventas acquired medical office building company Lillibridge Healthcare Services, a formerly private company with a 25-year history of serving not-for-profit, highly-rated hospital systems.
“We have a great cost of capital, we know how to solve customer problems, and we’re uniquely positions with our Lillibridge business to be in the CEO suites of all these hospital systems,” says Cafaro, adding it’s one area the REIT is “looking hard at” as a sector where it can provide capital to hospitals via their real estate, enabling them to consolidate their business and grow their markets.
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Written by Alyssa Gerace