Good run continues for healthcare REITs
December 16, 2015, was a historic day when the Federal Reserve increased the interest rate for the first time in nearly a decade. It’s likely that REITs will be hurt more by the rising rate environment since they’ll have to incur higher expenses. The dividends may end up less attractive to investors when compared to the yields on fixed income and money market instruments.
But healthcare REITs have shown resilience in this rising rate environment. The trailing four-week returns for Healthcare Trust of America (HTA), Welltower (HCN), HCP (HCP), and Ventas (VTR) have been positive with returns of 5.6%, 10.1%, 9.1%, and 8.1%, respectively.
Healthcare REITs in the iShares US Real Estate ETF (IYR) constitute 10% of IYR’s total weight.
Performance of Healthcare Trust of America
Healthcare Trust of America (HTA) owns and operates medical office buildings. The company invests in markets with above-average growth and healthcare infrastructures capable of servicing long-term patient demands. The company’s focus is to acquire medical office buildings and university medical centers.
Wall Street analysts are quite confident about HTA, with 45% of them in favor of buying. However, below are several factors that could impact HTA’s performance in the future.
- changes in economic conditions that affect the healthcare property sector
- economic fluctuations in states where HTA’s property investments are geographically concentrated
- competition for the acquisition of medical office buildings and other facilities that serve the healthcare industry
- changes in interest rates
- availability of capital and financing
- changes in credit ratings
The above graph shows the quarterly revenue generated by Healthcare Trust of America (HTA) over the years.