Growing Demand for Senior Residential Real Estate

http://www.reit.com Healthcare REIT fundamentals are in excellent condition going into 2012, according to David Haggerty, president and chief operating officer of Senior Housing Properties Trust (NYSE: SNH).

In a video interview with REIT.com at REITWorld 2011: NAREIT's Annual Convention For All Things REIT in Dallas at the Hilton Anatole hotel, Hegarty spoke about acquisitions and challenges.

In addition to senior housing, Senior Housing Properties Trust also has medical office space. Hegarty said the company is about one-third medical office and two-thirds senior housing.

He said fundamentals are positive and added that the long recession has provided some interesting dynamics.

"With the recessionary period extending so long there's been no new financing for senior living. The inventory has grown modestly over the past year or two and that continues to be the outlook for the net year," Hegarty said.

As the population ages the demand for senior living assets will increase, Hegarty said. He said that this makes for excellent fundamentals for those companies who are already established in the industry.

Senior Housing Properties Trust has been one of the most acquisitive in the healthcare REIT space in 2011, according to Hegarty. The company has bought more than $1 billion in properties this year, which he said amounts to a 25 percent growth of its asset base.

"There are a number of private equity and other investor types that have caught on to the positive fundamentals and have been able to attract a considerable amount of capital to invest in this space," Hegarty said.

As a result, Hegarty expects increased competition which he said will continue to hold cap rates down. However, he added that one of the bigger questions is whether or not the competition will have access to the debt financing that makes returns attractive enough for them to want to constitute investing in the space.

In terms of challenges, Hegarty said that the sector may be challenged with all of the talk about potential Medicare and Medicaid cuts. However, he said that in Senior Housing Properties Trust portfolio, less than 5 percent of its NOI is tied to government dependent type properties.

"We have sold off assets that are in the skilled nursing area in the last several years and we'll continue to sell off those assets," Hegarty said.

By Allen Kenney

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News & Politics

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