VNQ - Global Medical REIT:  Patient In Stable Condition Risk Priced In

2024-02-02 07:30:00 ET

Summary

• Healthcare REITs have had a slow start this year, underperforming compared to other indices.
• "Private pay" subsectors such as senior housing, medical office, and lab space are likely to deliver better returns this year than public pay.
• Global Medical REIT is a small-cap private-pay company focused primarily on acquiring medical office buildings at high cap rates and renting them to physicians' groups and regional healthcare systems.
• The company offers a high yield, but the dividend is in some danger of a cut.

Healthcare REITs are off to a slow start this year, averaging a total return of (-4.98)%, compared to positive returns for the S&P 500 (3.36%), Nasdaq 100 (3.90%) and Dow Jones (2.17%), and somewhat below the REIT average of (-4.05)%.

The Healthcare REIT sector is very diversified, with 16 companies holding differing mixes of MOB (Medical Office Buildings), SH (senior housing), SNF (skilled nursing facilities), rehab facilities, hospitals, and lab/research facilities. Right now, those with exposure to senior housing should have an advantage, according to Hoya Capital's latest sector report , which reads, in part:

For Senior Housing REITs, the long-awaited recovery is finally taking hold. Robust rent growth is being fueled by rising resident incomes from record-high Cost-of-Living-Adjustments ("COLA") to Social Security benefits.

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