Ready to Bet on Healthcare REITs?
"The REIT sector is at an interesting crossroads," says Jefferies' Jonathan Peterson.
Worried about the overall macroeconomic environment/? Bet on healthcare REITs, says Jonathan Peterson, managing director at Jefferies.
“The REIT sector is at an interesting crossroads,” Peterson told CNBC’s Power Lunch this week. Peterson posits that the value of real estate is down 25-30% year to date, a figure he thinks it’s “basically priced into” the REIT sector.
“But when we flip the page to ext year we do start to be more concerned about the macro environment,” he says. Peterson says he’s keeping his eye on three types of CRE against that backdrop: those with strong structural demand tailwinds (like data centers, cell towers and warehouses), those with long-duration leases, and life sciences portfolios and healthcare properties.
Among the healthcare subtypes Peterson likes are private senior living facilities like Ventas, where the rent is all private-pay, and Welltower: “these guys are benefiting from the post-pandemic recovery, and we think no matter what happens that will continue into next year,” he predicts.
Medical office buildings are also another favored subtype: “people still go to the doctor in a recession,” he told CNBC, adding Healthcare Realty Trust has the best portfolio of MBOs adjacent to hospitals with a 7.6% dividend yield.
Earlier this year, Healthcare Realty Trust announced a strategic business combination with Healthcare Trust of America that created one of the largest pure play medical office REITs in the market, with 727 properties totaling 44 million square feet—nearly double the square footage of the next largest MOB portfolio. The $18 billion deal will see the entity own the largest portfolio of on or adjacent to hospital campus properties with 28.2 million square feet of space.