Fitch: Healthcare REIT Outlook Supported by NIC Data
Recently published seniors housing data supports Fitch Ratings' Stable Outlook for the U.S. healthcare REIT space. On Thursday Jan. 11, NIC MAP -- a provider of data and analytics on the seniors housing and nursing care industry -- published 4Q12 senior housing data that highlighted a steady improvement in fundamentals, which we believe should lead to continued solid property level cash flow growth in the sector in 2013.
NIC MAP reported that senior housing occupancy rose 100 basis points to 89.1% in 4Q12 from 4Q11 and annual rent growth was 2.2%. Notably, occupancy is up 210 basis points from the cyclical low in 1Q10. We expect fundamentals to remain positive due to favorable demographics and muted new supply. According to NIC MAP, there were only 10,500 new units under construction in 4Q12 compared to over 22,000 during the recent peak 1Q08.
The NIC MAP data lends credence to the significant acquisition volume in the senior housing sector, exemplified by the recently closed acquisition of Sunrise Senior Living by Health Care REIT, Inc.
Separately, occupancy for skilled nursing facilities (SNF) declined by just 10 basis points to 88.1% in 4Q12 from 4Q'11 while rents grew 2.9%. We view the modest decline in occupancy, combined with solid rent growth, as positive, given the 11.1% payment reductions to SNFs in fiscal 2012 that was mandated by the Centers for Medicare and Medicaid Services. However, the payment cuts combined with higher rents have led to moderately declining rent coverage levels, which is consistent with our previous outlook.
For more information on this topic, please see our recent report "2013 Outlook: U.S. REITs".
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
George Hoglund, CFA
+1 212 908-9149
+1 212 908-9123
One State Street Plaza
New York, NY 10004
Brian Bertsch, +1-212-908-0549 (New York)