Health Care REIT, Inc. (HCN), a real estate investment trust (REIT) that operates senior housing and health care real estate assets, has recently announced gross investments of $1.6 billion in fourth quarter 2010, partially offset by $77 million of asset sales and loan payoffs resulting in $1.5 billion of net new investments for the quarter.
For full fiscal 2010, gross investments of the company totaled approximately $3.2 billion. Health Care REIT sold assets worth $196 million during the year that resulted in net new investments of $3.0 billion in 2010. The company exceeded the high-end of its most recent guidance for the year by about $450 million, signifying stabilization of market fundamentals.
Health Care REIT invests across the full spectrum of senior housing and healthcare real estate properties. Headquartered in Toledo, Ohio, the company also provides an extensive array of property management and development services.
Founded in 1970, the company was the first REIT to invest exclusively in healthcare facilities. Health Care REIT provides senior housing operators and healthcare systems with a single source for facility planning, design and turn-key development, property management and monetization or expansion of existing real estate.
Health Care REIT has established quite a track record of conservative capital management and cash returns to shareholders in the form of steady dividend and has paid uninterrupted dividends for 157 quarters in its 39-year history. The company usually has long-term triple-net leases in senior housing and healthcare real estate properties that insulates it from market volatility and provides a steady source of revenue despite a challenging macroeconomic environment.
The healthcare sector is one of the more recession-proof real estate sectors and has continually fared comparatively better than other sectors during the commercial real estate downturn. In addition, an aging Baby Boomer generation’s demand for assisted and independent living facilities should increase in the coming years. With a significant presence in these property types, Health Care REIT is in a relatively strong position than most of its competitors.
However, deep cuts in Medicare have been proposed over the next five years by reducing or freezing payments to skilled nursing facilities, hospitals, and other healthcare providers. With a large portion of revenues being determined by government payout rates, forces beyond the company’s control could negatively affect revenues and operator coverage ratios.
We maintain our Neutral rating on Health Care REIT, which currently has a Zacks #4 Rank that indicates a short-term Sell rating. We also have a ‘Neutral’ rating and Zacks #2 Rank (short-term Buy) for Nationwide Health Properties Inc. (NHP), a competitor of Health Care REIT.
HEALTH CR REIT (HCN): Free Stock Analysis Report
NTWDE HEALTH PR (NHP): Free Stock Analysis Report
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