Alex Pettee, CFA- Alex Pettee, CFA
Healthcare REITs: Stuck In Rehab
Following three straight years of underperformance, healthcare REITs showed signs of life in 2018. The early tremors of the long-awaited demand boom are finally beginning to appear.
The investment thesis related to the “aging population” has been no secret. The healthcare real estate industry - especially senior housing –continues to battle an “addiction” to new supply growth.
For senior housing, supply pressures are expected to linger throughout 2019 as expense growth continues to outpace revenues. These REITs have been reluctant to call a bottom to fundamentals.
Operator struggles and policy uncertainty continues to trouble Skilled Nursing and Hospital REITs. Don’t expect the political rhetoric or uncertainty to moderate heading into the 2020 presidential election cycle.
The REIT Rejuvenation - and its impact on equity valuations – should be a jolt of adrenaline for a sector that relies on a strong cost of capital to fuel external growth.