1. The U.S. Census Bureau categorizes Baby Boomers as individuals born between 1946 and 1964.
2. The effects of having to care for such a large group will be felt in many areas.
3. By 2029, when the last round of Boomers reaches retirement age, the number of Americans 65 or older will climb to more than 71 million. That’s up from about 41 million in 2011, a 73 percent increase, according to Census Bureau estimates.
4. Ventas
5. According to CBRE’s
6. The medical office market has performed well in recent years, registering a lower peak vacancy rate than traditional office properties during the 2008 recession, and showing a steady decline in vacancy during the recovery. Net absorption has outpaced new supply in 24 of the past 29 quarters, with particularly large imbalances since 2015.
7. Gross asking rents have been stable, reflecting consistent user demand and long lease terms that limit tenant turnover. New medical space completions have also been low relative to pre-recession levels, and the amount of space under construction has decreased slightly from the Q2-16 peak.
8. Chris Bodnar, vice chairman, Healthcare, CBRE Capital Markets, explains, “Investment trends reflect strong medical-office market fundamentals and a broadening pool of interested investors. While uncertainty about healthcare policy poses a risk to the medical office market, favorable demographic trends point to continued strong healthcare demand, regardless of any policy changes.”
9. The core business of healthcare is inherently driven by demand for patient care, providing a stable foundation to support investment in the sector. The need for more facilities and services to manage the chronic illnesses of this aging population will be a major driver for growth.
10. Despite the controversy around these and future changes to reimbursement, healthcare is a required service that will continue to need real estate assets, and REITs provide an excellent vehicle for healthcare providers to become more efficient by partnering with “healthy” capitalized companies.
On my REIT Watch, five of the healthiest healthcare REITs:
Ventas Inc.
LTC Properties, Inc.
In business over 25 years. Enterprise value (June 30) over $2.1 billion. Holds 199 investments in nearly balanced capital allocation: assisted living communities (102, includes independent living & memory care communities), skilled nursing centers (96), behavioral healthcare hospital. Locations in 28 states. FFO $29.6 million for Q2-18 ($31.4 million Q2-17), decreases mostly from defaulted master lease in Q3-17 and reduced rental income from sold properties the past year. Recently sold portfolio of six assisted living and memory care communities for net gain $48.3 million; andacquired two memory care communities in Texas for $25.2 million with 10-year master lease and 7.25% initial cash yield. New unsecured credit agreement has opportunity to increase to $1.0 billion. Dividend payout ratio 76%, yielding 4.95%. STRONG BUY
Healthcare Trust of America, Inc.
Welltower Inc.
Physicians Realty Trust
Note: For a detailed SWAN (sleep well at night) research report on over two dozen choices across numerous REIT sectors, see the new Forbes Real Estate Investor, out Tuesday. Subscribe here.)
I am long VTR, LTC, HTA, and DOC.