horney, this reit could go on for as long as the lenders are willing to let it or is able to generate enough cash flow to keep debt payments up. PRT is an example of a reit with such complicated financing that the lenders are in a box.
I should have clarified that this reit is "done" as it relates to its investment potential. I cannot judge its operating abilities because it can or will continue to operate for the benefit of mgmt for as long as possible. PRT is a testament to the fact that a "done" reit can keep operating, find money to borrow at prime +7-9%; sell off assets to paydown debt a little here and there.
I never said this Andre character should resign.
I cannot find big fault with the OHI, NHI, or LTC model. When I did my analysis of all these reits back in 1998 it was easily understood that the top tier reits paid less in dividends and were safer investments because they had greater operator diversity and they had for the most part top tier operators. LTC, OHI, and NHI operator mix was more concentrated and their operators were not as strong financially.
You, the investors in these weaker healthcare reits chose to earn the 200-300 basis point dividend difference that was a clear signal that these reits had greater risk. For a long time it could be said that OHI and LTC were outperforming HCP, HCN, NHP, and HR and were in fact getting better analyst writeups because of the appearance that these reits had turned out to have a good operator mix AND were offering higher dividend yields and growth than the old guard healthcare reits.
The most important lesson for all in healthcare reits is to stand with the old guard, take the lower dividends in return for a much greater measure of safety. That has been my motto all the way and the rewards are being given to those investors as I write this to you. BUT, always must be vigilent to make sure that even the best reits do not get cocky by their past success and start to overreach beyond their internal capabilities.
for your, as always informative posts. Given my return since buying LTC, I can say your posts are almost worth the pain. (Please keep posting AND often!)
Are there any macro factors that could change your opinion concerning the potential growth/valuation rates of LTC business, properties, etc.? It seems (like a mirage) that Medicare reimbursements are always on the cusp of being increased. The logjam in the credit markets we saw pressuring leveraged borrowers at the end of '00 seems to be ever-so-slowly giving way. Obviously as the wider market melts down the corresponding need for cash continues to hurt the more leveraged, operationally challenged. But are these, and any other factors reason to be optimistic in the LONGER TERM?
I have been following the earnings reports of the Tenent Healthcare's of the world. They had fantastic earnings which lifted all healthcare boats the other day including the big 3 healthcare reits.
I think the LTC and OHI story is that their operators were always on the edge and got pushed over by MediCare. If LTC and OHI operators were experiencing any of the recovery that Healthsouth, Tenent, etc. are one would think it would be reflected in stock price now.
I don't know if LTCers simply follow the group of healthcare reits as a guide. If not you should know that the big 3 have had huge price increases. HCP and HR sell at sub 10% dividend yields. NHP sells below 11%. All are at 52 week highs. HR is going to float up to $500M equity/debt offering perhaps to buy facilities. HCP has to be close to wanting to do an equity offering. These equity offerings give both these reits a chance to only further strengthen their market position.
If LTC and OHI could float equity right now it would go a long way towards correcting some of their problems. But they cannot because it would destroy perceived NAVs and no one would have an interest in buying equity from LTC and OHI even at these prices.