Seniors Housing Weekly Update - Another Health Care REIT?

July 29, 2014

 

July 29, 2014. 60 Seconds with Steve Monroe. AdCare Health Systems is getting out of the operating business to become a landlord....

Another Health Care REIT?

Despite the temporary slump in health care REIT stock prices a year ago, becoming a health care REIT still remains one way to achieve a higher valuation. Although The Ensign Group’s stock price performed better than average, it went the way of a REIT spin-off. Now, AdCare Health Systems, which has certainly underperformed the market and its peers, has decided to get out of the operating business and lease its skilled nursing facilities to third party tenants. It plans to start a dividend at 5 cents per quarter, which is a 4.3% annual yield, increasing it quarterly so that by the end of 2015 the yield would increase to 7.7%, assuming no price increase, and even higher the next year. Sounds like a good deal to me if it all works out. Although AdCare did not say it, we assume the ultimate goal is to convert to a REIT at some point, perhaps when all their tax loss carryforwards have been used up. While it would be fair to say the last thing we need is another REIT, there is a surprising amount of opportunity out there for investing, and don’t forget more REIT on REIT deals that we expect to see. It’s all part of the circle of life.   

 

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