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The healthcare industry has been quite a leader this past year with the national pandemic and many investors have realized the opportunity for investing in healthcare REITs. The astounding growth and need of health care facilities have made this kind of REIT one to keep an eye on.
What are Health Care REITs?
Health care REITS own, manage, and collect rent from healthcare-related real estate. There are a variety of facility options, including:
- Senior Housing
- Skilled Nursing
- Hospitals
- Medical Office Buildings
- Life Sciences
Benefits of Healthcare REITs
Aging population. The influx of baby boomers nearing the age for healthcare needs and senior housing will undoubtedly cause a major increase in occupancy and necessity. Over the next 20 years, there will be an increase of nearly 44% of people aged 65 or over. This will cause an increased need for all types of healthcare-related real estate in all parts of the country.
Necessity, not a luxury. As the last year has shown us, there is always a need for health care, at any age. The elderly were hit the hardest this past year, but people of all ages needed more healthcare options than ever before. Now it has become not only a need for annual checkups but a global need for more hospitals and medical offices. As children were unable to care for their aging parents, the need for senior housing and skilled nursing has also increased. It’s not just a luxury anymore to be in senior housing - it is a necessity for many baby boomers.
Growing pharmaceutical industry increasing demand for life sciences space. With a limited supply of lab space, new construction is needed and being delivered. Such low vacancy rates in this market are causing landlords to evaluate the most immediately needed demand and act accordingly. This industry has seen an increased rate for life science investment sales of triple what May 2020 had.
Investors are celebrating. And experts reveal the perfect storm that led to this lesser-known instrument becoming a cash cow for risk-averse folks who aren’t wary in this uncertain market.
Risks with Healthcare REITs
Recovering from the pandemic. The operators that lease the facilities from the REITs have been hit very hard financially from the pandemic. Some may take several years to recover, and others may never recover. This means it may take a while for rents to stabilize.
Competition. The increased need for different types of health care has created major competition. People now have more access to in-home care and other programs. With these alternatives and options, this already highly competitive industry is sure to become even more competitive. This also includes competition of qualified professionals. A possible shortage of qualified workers would mean that operators need to pay more to retain their staff and/or hire new staff.
The growing need for healthcare facilities after the pandemic and with the aging population should show that investing in this type of REIT has a lot of promising possibilities. As with all REITs, there is always a risk. However, as we see many retail and hospitality industries bouncing back, rest assured that the healthcare industry is one industry that is specifically needed for the well-being of our nation.
Best Healthcare REITs
If you're ready to invest in healthcare REITs, you should take a look at Omega Healthcare Investors (NYSE: OHI), Medical Properties Trust (NYSE: MPW), and National Health Investors (NYSE: NHI). These three medical REITs are well-positioned to continue growing and provide an attractive dividend yield to investors.
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
Largest Healthcare REITs
Welltower
Welltower Inc. (NYSE: WELL) is an S&P 500 firm whose aim is to transform the healthcare infrastructure with its strategies. The company partners with leading senior home operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale new care delivery models and improve people's well-being and overall healthcare experience.
Welltower's objective is to promote wellness, encourage a good quality of life for older populations and assist other organizations and initiatives that work in the same direction.
The company is one of the world's largest healthcare real estate investment trusts (REITs), with an enterprise value of a few billion dollars as of early 2021. Welltower owns more than 1,400 properties in the United States, Canada and the United Kingdom. Some of the company's estates worth mentioning include Wellbrooke of Westfield, Virtua Washington Township and Saint Joseph Medical Center medical office buildings (MOB).
| Market Cap | $35.606 billion |
| Dividend Yield | 3.29% |
Ventas
Ventas Inc. (NYSE: VTR) is a leading REIT and S&P 500 firm. Seniors housing communities, medical office facilities, life science and innovation centers, health systems, inpatient rehabilitation and long-term acute care accommodations and skilled nursing facilities are among the company's broad portfolio of more than 1,200 properties across the United States, Canada and the United Kingdom.
Ventas is working with leading care providers, developers, research, educational and medical institutions, innovators and healthcare organizations. The company uses the power of capital to unlock the value of senior living communities, research and innovation centers, life science, medical office and outpatient facilities and other healthcare real estate.
Some notable buildings Ventas owns include Brookdale Lake Shore Drive, The Hallmark Chicago, Sunrise of Buffalo Grove and South Street Landing.
| Market Cap | $18.870 billion |
| Dividend Yield | 3.70% |
Healthpeak
Healthpeak Properties Inc. (NYSE: PEAK) is an S&P 500 corporation and a fully integrated REIT. The firm owns and develops high-quality real estate in the three private-pay health care asset classes of life science, senior housing and medical office to ensure long-term stability during industry cycles.
Healthpeak has a solid strategy for long-term growth and deep knowledge of the healthcare real estate market. The company is based in Denver, Colorado, with offices in Nashville and San Francisco and owns real estate worth around $20 billion in various U.S. states, including Illinois, Florida, Georgia, Washington, D.C., and Texas.
Some properties Healthpeak owns include Alaska Regional Hospital, Atlanta Hospital, Brookdale Olney in Washington, D.C. and Cedar Park MOB.
| Market Cap | $12.879 billion |
| Dividend Yield | 4.99% |
Healthcare REIT ETFs
ETFs provide a great option to invest in a select real estate asset class by investing in a fund that chooses which REITs to buy. The healthcare REIT sector is relatively small compared to other REIT types, so it's difficult to find an exchange traded fund focused solely on healthcare REITs. However, these REIT ETFs have a considerable percentage of their holdings in healthcare REITs and have a history of solid performance.
Below are 3 healthcare REIT ETFs worth looking at:
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
Industry Overview
| Number of REITs | 15 |
| Average Dividend Yield | 4.84% |
| YTD Total Return | 12.81% |
| December Total Return | 12.81% |
| 2022 Total Return | -22.18% |
Quarterly Performance Data
| Financial Metric | Q3 2022 | 2022 YTD |
|---|---|---|
| FFO ($M) | $1,564 | $5,073 |
| NOI ($M) | $2,296 | $7,084 |
| Dividends Paid ($M) | $1,303 | $4,218 |
| Same Store NOI | 5.10% |
All Healthcare REITs
| Ticker | Company Name | Market Cap | Dividend Yield |
|---|---|---|---|
| CHCT | Community Healthcare | $1.001B | 4.62% |
| CTRE | CareTrust REIT | $1.918B | 5.59% |
| DHC | Diversified Healthcare | $221.894M | 4.08% |
| DOC | Physicians Realty Trust | $3.484B | 6.20% |
| GMRE | Global Medical REIT | $637.493M | 8.35% |
| HR | Healthcare Realty Trust | $7.245B | 6.36% |
| LTC | LTC Properties | $1.440 | 6.37% |
| MPW | Medical Properties Trust | $5.924B | 11.3% |
| NHI | National Health Investors | $2.330B | 6.55% |
| OHI | Omega Healthcare | $6.156B | 10.0% |
| PEAK | Healthpeak Properties | $12.869B | 4.99% |
| SBRA | Sabra Health Care REIT | $2.720B | 10.1% |
| VTR | Ventas | $18.864B | 3.70% |
| WELL | WELLtower | $35.640 | 3.29% |
Investing in Healthcare REITs
There's no doubt that healthcare REITs are an attractive investment. Between their high dividends and growth potential with the aging population, healthcare REITs provide an excellent investment opportunity. Many healthcare REITs are also currently trading at a discount, so the timing couldn't be better to get in on this asset class.
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