Jefferies Healthcare REIT Summit: Key Investor Takeaways

Jefferies on Thursday published a research report detailing healthcare trends and company specific updates gleaned from its Health Care REIT Summit held Tuesday in NYC.

A total of 11 HCREITs attended the conference, including six currently covered by Jefferies; additionally, Jefferies included a Ventas, Inc. update, due to its recent SNF SpinCo and Ardent Health Services hospital acquisition announcements.

Raised PTs

Jefferies raised its price target on four REITs under coverage:

• Health Care REIT, Inc. HCN – $27.3 billion cap, 4.2 percent yield
• Medical Properties Trust, Inc. MPW – $2.6 billion cap, 5.8 percent yield
• Sabra Health Care REIT Inc SBRA – $1.95 billion cap, 4.75 percent yield
• Ventas, Inc. VTR – $24.8 billion cap, 3.1 percent yield

In addition, Omega Healthcare Investors Inc OHI – $7.7 billion cap, 3.6 percent yield – was maintained at a Buy rating, with no change to Jefferies' price target.

Health Care REIT Trends

Acquisition Pipelines: Opportunities appear robust across both, domestically and internationally.

Skilled Nursing: There are large skilled nursing (SNF) portfolios, potentially over $1 billion which could be in play, specifically Holiday Retirement and Brookdale Senior Living.

Organic Growth: Demand vs. supply across all property types (Senior Housing, MOB, SNFs, Life Sciences and Hospitals) all reported as being strong.

Life Sciences Acceleration: Jefferies noted, "Life sciences in particular feels like it is accelerating from an occupancy and rental rate point of view."

Triple-Net Operators: Regarding triple-net operators, Jefferies generally expects "stable to improving rent coverage in senior housing, SNFs and hospitals as the reimbursement outlook for FY16 is likely to be benign."

Medical Properties Trust: Buy, PT Raised To $17

• Jefferies new Medical Properties Trust price target is based on its dividend discount model (DDM) and implies a 17.6 percent total return based on a recent close of $15.21 per share.
• Medical Properties Trust has a unique strategy focused on acquiring and developing: inpatient rehabilitation hospitals, long-term acute care hospitals, regional acute care hospitals, as well as other single-discipline healthcare facilities.
• Medical Properties Trust reported a potential acquisition pipeline of approximately $1 billion, split 50/50 between the U.S. and Europe.

Health Care REIT: Hold, PT Raised To $78

• Jefferies new Health Care REIT price target is based on its dividend discount model (DDM) and implies a 3.9 percent total return based on a recent close of $78.24 per share.
• Health Care REIT is an S&P 500 company that invests across the full spectrum of seniors housing and healthcare real estate, diversified across 46 states, the U.K. and Canada; additionally, the company provides property management and development services.
• Regarding Health Care REIT's acquisition pipeline, management reported "that overseas investment will likely remain focused just on the U.K. for the time being;" however, in contrast to some of the other participants, Health Care REIT still sees accretive deals in the U.S. seniors housing sector.

Related Link: New Senior To Participate In The Jefferies 2015 Healthcare REIT Summit

Omega Healthcare: Buy, Maintain $47 PT

• Jefferies Omega Healthcare Investors price target is based on its dividend discount model (DDM) and implies a 22.3 percent total return based on a recent close of $40.20 per share.
• Omega is a fully integrated, self-administered HCREIT that invests primarily in Skilled Nursing Facilities (SNFs); notably, Omega Healthcare Investors recently closed on the acquisition of AVIV REIT in a consolidation of the SNF REIT space.
• Omega Healthcare Investors primarily sources its deals from its existing SNF tenants and has a pipeline of "smaller and mid-sized deals with cap rates in the 8.5 percent - 9.5 percent range," as well as some senior housing opportunities.

Sabra Health Care: Hold, PT Raised To $33

• Jefferies new Sabra Health Care REIT price target is based on its dividend discount model (DDM) and implies a 5.6 percent total return based on a recent close of $32.75 per share.
• Sabra's investment portfolio included 160 real estate properties held for investment and leased to operators/tenants under triple-net lease agreements, including: 103 SNF/Transitional care, 55 senior housing and two acute care hospitals.
• Sabra is evaluating approximately $1 billion of deals, or three times the normal volume; notably, despite low cap rates, "Most deals still have net investment spreads wider than in 2012 due to the low cost of debt."

Ventas: Hold, PT Raised To $80

• Jefferies new Ventas price target is based on the high-end of its sum-of-the-parts (SOTP) valuation of the proposed SNF SpinCo and pro-forma Ventas, including the Ardent Health acquisition. It implies a 9.6 percent total return, based on a recent close of $75.10 per share.
• Ventas is an S&P 500 company, operating as a self-managed healthcare REIT with a diverse asset mix, including: senior housing, SNF/Acute facilities, MOBs and hospitals.

A recent Benzinga article, including VTR presentation slides which explain the SpinCo & Ardent acquisition, can be viewed here.

Image Credit: Public Domain