Health Care REIT to Sell Entrance-Fee Portfolio & Gain $95M - Analyst Blog

Health Care REIT Inc. (HCN) is expected to reap a gain of around $95 million by selling seven entrance fee communities and one rental community for $435 million. The company has inked a deal in this regard and the purchase price depicts a 5.6% cash yield on sale.

This move comes as part of the company's effort to trim its non-strategic assets and reuse the proceeds in accretive measures. Following this disposition, only one entrance fee community will be left under HCN's ownership. Expected to be accomplished by the end of this year, this sell-off takes place in addition to the company's lately revealed disposition outlook of $625 million for this year.

While HCN is disposing its non-core assets on one hand, it is also making some strategic acquisitions on the other hand. The most recent among these acquisitions is that of HealthLease Properties.

Recently accomplished, this HealthLease purchase added high-quality seniors housing, post-acute care and long-term care communities, concentrated over North Carolina, IN, and Alberta, Canada. The purchase price denotes a 7% initial cash yield. Managed under long-term triple-net lease agreements by reputed operators, the portfolio acquisition is expected to facilitate a steady source of rental income in the long term, thus providing HCN with a competitive edge. HCN also entered into a partnership with Mainstreet Property Group for acquiring several communities under the Next Generation brand.

We believe that such strategic portfolio restructuring activities, along with an enhanced liquidity position, would position the company well on the growth track. Rise in senior citizen spending for healthcare reasons also promises strong prospects while the anticipation of a continued low rate environment for an extended period is an added bliss.

HCN currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider better-ranked stocks like Duke Realty Corporation (DRE), Prologis, Inc. (PLD) and Public Storage (PSA). All these stocks carry a Zacks Rank #2 (Buy).