Seniors Housing Weekly Update - Seniors Housing & Care At A Crossroads

October 2, 2012


 

October 2, 2012. 60 Seconds with Steve Monroe. With increased rumors of public company takeovers, will the sector be worse off with just a small handful of public companies?

Seniors Housing & Care At A Crossroads

Is the seniors housing and care sector standing at a capital markets crossroads today? Although everyone would like to have higher occupancy rates and increased cash flow, when looking at the bigger picture of health care REITs and the publicly traded operating companies, it’s certainly looking like the good times are back. Values have skyrocketed and deal-making is flourishing. But what does it all mean?  Reading investment reports, it would appear that most every public company is now “in play,” with everyone trying to figure out who will be the next Sunrise Senior Living doing a blockbuster deal with a REIT. Perhaps. But what would happen if, a few years from now, we are left with just a few public companies, and just three REITs controlling 80% or more of the health care REIT market? Would there be less transparency? With fewer companies reporting occupancy, rate growth and margin trends, would we really know how the industry was performing? Would the REITs divulge more information on their operating partners…or less. A lot of takeover rumors have been swirling around, and if there is any truth to them, we may be in for a significant change in the “public” face of the market.     

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REITs Divest?

When do you think we will start to see REITs sell individual assets? One has to imagine that some of the properties in their portfolio are older or smaller. As they grow and acquire newer, larger portfolios, do you think they will sell any of the less desirable assets? I am surprised that we haven't seen that yet given the strong demand we have for individual assets from private, regional companies.

REITs divesting assets

The REITs already have sold properties, but they keep it way under the radar and it is unclear how they go about it (direct sale or intermediary). In the notes of their SEC documents they will usually report the number of properties sold in a given quarter if they have done any sales, but give no other details so it is impossible to know what, where and to whom. It would be nice to know.

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