The nation’s largest health care real estate investment trust (REIT) had humble beginnings in the 1970s. But since then, Health Care REIT (NYSE: HCN), a $40 billion company, has vastly expanded its reach, while periodically shifting strategies to keep up with the evolving senior care landscape.
What started as a small company, named Health Care Fund, with two nursing homes in its portfolio has ballooned into a company with 1,377 properties scattered across 46 U.S. states and six Canadian provinces, with an additional 105 properties in the U.K., according to a recent article in The Blade, a publication based in Toledo, Ohio, the REIT’s headquarters.
While its origins stem from nursing home investments, HCN has shifted its strategy over the years, even long before it invested in Mainstreet’s post-acute care model last year.
Instead, as the 1990s brought forth a new kind of senior care — assisted living — HCN’s approach shifted accordingly, with its interest in traditional nursing home properties waning.
“That disappeared in the late 1990s when the assisted living industry emerged,” COO Jeff Miller told The Blade. “Even then, the company was into backing operators who were developing assisted living facilities. When [founders Bruce Thompson and Frederic “Fritz” Wolfe] started Health Care Fund, skilled nursing was a relatively new field and it had just started to take off.”
But, as the industry knows all too well, senior housing and care is a changing landscape, as is health care in general. And to keep up with the latest investments, HCN has evolved with the environment.
Currently, 835 properties owned by HCN, or about 61% of its portfolio, are senior-assisted living communities, which The Blade describes as housing with some level of personal health and living assistance.
About 283 properties, or 21%, are long-term and post acute-care facilities. The rest, about 259 properties, are outpatient medical facilities, medical office buildings (MOBs), five hospitals, and 11 parcels of land.
The majority of its portfolio mix is represented by private-pay sources, a marked shift in the REIT’s investments in its early days.
“About 87% — and growing — of our revenues come from private-pay sources,” CEO Thomas DeRosa told The Blade. “We much prefer the stability of being involved in the private-pay side of health care.”
He added, “The one thing that doesn’t fit what we own was the old model [of Health Care REIT],” said DeRosa, who took the helm in April 2014. “The long-term Medicare/Medicaid nursing home is no longer part of our strategy, so we have sold $2.5 billion of nonstrategic health care real estate over the last 10 years.”
Now, the company desires properties to “deliver wellness” to an aging population — communities that address nutrition, mobility and cognitive functions, DeRosa said.
“Health care is evolving,” he said. “There’s a lot of health care real estate that can’t deliver the treatments that are needed because they are antiquated buildings.”
The REIT, however, has not been shy about its appetite for the highest quality assets operated by the highest quality operators in the best markets. Today’s strategy is no different.
“We think that those are the best ingredients,” Miller said.
To read The Blade’s full story, click here.
Written by Emily Study