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Healthcare REITs and Their 2Q17 Capital Deployment Strategies

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Why development and redevelopment are important

Healthcare REITs regularly undertake strategic development and expansion activities in order to maintain their leadership in the industry and offer class services to their customers.

In this part of the series, we’ll look at the capital deployment initiatives in 2Q17 for the top three healthcare REITs—Welltower (HCN), Healthcare Trust of America (HTA), and Ventas (VTR).

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Welltower geared up acquisitions in 2Q17

Welltower spent $292.0 million on development and expansion in 2Q17. Of that amount, $110.0 million was spent on acquisitions. The company acquired two private-pay senior housing facilities in Tulsa, Oklahoma, and Greeley, Colorado. It also took over a 90-unit senior housing property worth $24.0 million in Houston, Texas, and two outpatient medical office buildings worth $19 million in Austin, Texas, and California. It also disposed of non-core and underperforming assets to streamline its properties.

HTA spent $2.6 billion for expansion

During 2Q17, Healthcare Trust of America increased its stake to 92.0% in a property spanning 6.2 million square feet and worth $2.6 billion. After the end of 2Q17, it purchased 292,000 square feet of property worth $149.2 million that was 99.0% leased and located in its key market.

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Ventas deployed $110 million for development and expansion

Ventas spent $110.0 million for capital deployment in 2Q17. Of that amount, $53.0 million was spent for expansion of its senior housing portfolio through acquisitions from existing partners. Another $57.0 million was spent for development and redevelopment projects in the pipeline.

Guidance

Ventas plans to spend $188.0 million in fiscal 2017 for development and redevelopment of premium senior housing facilities located in Atria Senior Living and Sunrise Senior Living. It still expects to complete the sell-off of 36 skilled nursing facilities at an expected gross proceed of $700.0 million.

Welltower intends to invest $173.0 million for development projects in fiscal 2017. It expects $2.0 billion in proceeds from its sell-off activities.

The three REITs, along with Public Storage (PSA), account for 26.0% of the iShares Residential Real Estate Capped (REZ). The ETF has a net asset worth $416.5 million.

In the next part, let’s look at these REITs’ debt positions.

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