U.S. Health Care REITs Are Just What the Doctor Ordered for Investors

SNL Financial data shows what these companies are worth in today's market and how this growing sector stacks-up against other US REITs right now

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SNL Financial

Apr 14, 2011, 02:51 ET

CHARLOTTESVILLE, Va., April 14, 2011 /PRNewswire/ -- Health care continues to be a shining star in the U.S. Real Estate Investment Trust (REIT) world, and with recently announced or closed transactions, public companies' hold on the ever-growing market will continue to soar. Among all REITs, the health care sector has traded at the largest premium to net asset value (NAV) for the past 12 months, with a current average premium to NAV of 30.8% as of April 7. As of the same date, the only health care REIT trading at a discount to NAV was Cogdell Spencer Inc., while Omega Healthcare Investors Inc. topped the list of premiums to NAV at 55.1%.

With the growing number of aging baby boomers and the nation's health care reform offering insurance to more citizens, the health care sector is seeing an increase in demand for medical care facilities, thus creating attractive investment opportunities.

  • Overall transaction activity involving medical office buildings grew 118% year over year in 2010 to $4.2 billion, and publicly traded REITs claimed a larger share of the volume, according to the market research firm Real Capital Analytics.
  • Publicly traded REITs accounted for 43% of the activity in 2010, up from 21% in 2009. The numbers in part reflect Ventas Inc.'s acquisition of Lillibridge Healthcare Services Inc.
  • Year-to-date through April 6, publicly traded REITs have accounted for 25% of the total transaction activity for medical office buildings, according to RCA data.
  • With regard to total debt to total capitalization, health care REITs have posted lower ratios than all equity REITs for the past five years. In 2010, health care REITs had a leverage ratio of 26.95%, compared to 38.71% for all REITs.
  • In the context of how health care REITs stack-up against other sectors, as of April 12, 2011, health care REITs were at 26.3% premiums to NAV, with retail following behind at 14.8%, and self-storage taking third place with 11.4%.

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