How some healthcare REITs could win, and some could lose, under Trump
November 11, 2016 | Jacob Mooney | S&P Global Market Intelligence
Following the surprise election of Donald Trump to the presidency, some investors have turned their attention to healthcare REITs, which stand to be affected by Trump’s promised dismantling of Obamacare.
Yet just how individual companies will react — let alone how a repeal or replacement of the Affordable Care Act, or a phasing-out of Medicare would unfold — is a complex and highly uncertain proposition.
The healthcare REIT sector itself is a bucket of generally similar companies investing in a range of property types with varying degrees of exposure to government healthcare policy, including seniors housing, skilled nursing, hospitals and medical office buildings. Further complicating matters, the REITs themselves are not healthcare providers, but landlords to healthcare providers, making them another degree removed from providers’ fluctuating income streams.
Below is an outline of the current thinking, such as it is, on how the different subsectors and companies might behave.
Medical office buildings, often populated by doctors linked to large hospital systems and sometimes on or near the hospitals’ campuses, have been among the most prized healthcare-related properties in recent years, in part because healthcare reformers have sought to push more patient care into lower-cost settings like doctors’ offices.
Though the trend toward lower-cost settings is not solely a result of Obamacare, and would not likely end if the law were abandoned, shares of medical office building owners — Physicians Realty Trust, Healthcare Trust of America Inc., Healthcare Realty Trust Inc. and Universal Health Realty Income Trust, plus the large diversified REITs Ventas Inc., Welltower Inc. and HCP Inc. — have sold off to varying degrees in the days after the election.
Blue Vault is just what advisors need to size up the different offerings in the nontraded REIT market. Just as importantly, it’s what the industry needs to encourage best practices among REITs.