Health Care REIT to Vend Stake in Life Science Buildings - Analyst Blog
In sync with its strategy to concentrate on core businesses, Health Care REIT, Inc. HCN has inked a deal to divest its 49% interest in 7 mixed-use life science buildings situated at the University Park of Massachusetts Institute of Technology in Cambridge, MA. These buildings are developed by Forest City Enterprises, Inc, a Cleveland, OH-based diversified real estate management and development company. Forest City will redeem the interest of Health Care REIT for $573.5 million.
Notably, Toledo, OH-based Health Care REIT is a real estate investment trust (“REIT”) which invests in seniors housing and health care real estate. Health Care REIT has three reportable segments: seniors housing triple-net, seniors housing operating and medical facilities. As of Dec 31, 2014, 45.7% of the company’s investments were in seniors housing triple-net properties, 36.5% in seniors housing operating assets and 17.8% in medical facilities.
Nevertheless, this deal, expected to offer an un-levered internal rate of return (“IRR”) of around 15%, is likely to be accretive for the company in the near term. Health Care REIT intends to use the proceeds for reinvestment in its core businesses of owning, developing and managing the highest-quality seniors housing, post-acute and outpatient medical real estate in the U.S., UK and Canada.
Going forward, we expect such opportunistic investments to provide Health Care REIT with a competitive edge over its peers. In fact, these investments position the company well to capitalize on the rising trend of healthcare expenditure, backed by an increasing senior citizen population, the group that incurs higher medical expenses compared with the average population. However, an anticipated rise in interest rate and intense competition remain the pressing concerns.
Health Care REIT currently carries a Zacks Rank #3 (Hold). Investors interested in REITs may consider stocks like Gladstone Land Corporation LAND, Ryman Hospitality Properties, Inc. RHP and Hudson Pacific Properties, Inc. HPP. All these stocks hold a Zacks Rank #1 (Strong Buy).
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