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What’s Ahead for the Top 3 Healthcare REITs?

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The current situation in the sector

Healthcare REITs are well-positioned with properties at premium locations and a growing aging population who will need critical healthcare facilities in the coming years. 

Let’s see how the top three healthcare REITs—Welltower (HCN), Healthcare Trust of America (HTA), and Ventas (VTR)—are expected to perform in the rest of the year.

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Welltower raised its same-store NOI guidance for fiscal 2017

Strong performances in skilled nursing facilities prompted Welltower management to increase its SSNOI (same-store net operating income) guidance for fiscal 2017. The company now expects SSNOI to rise in the range of 2.3%–3.0% in 2017, compared to 2.0%–3.0% expected previously. It has also lowered its EPS (earnings per share) outlook for fiscal 2017. It now expects to report net income per share of $2.32–$2.42 compared to $2.39–$2.49 previously. The company reaffirmed its FFO (funds from operations) guidance and now expects it to be $4.15–$4.25 per share. Analysts expect the company to report FFO of $1.06 per share in 3Q17 and $4.23 for fiscal 2017.

Ventas reaffirmed 2017 guidance

Ventas expects EPS of $1.72–$1.78. Adjusted FFO is expected to be $4.12–$4.18. It expects to complete the sale of some of its SNFs (skilled nursing facilities) during the year, beginning in 3Q17 and ending by the end of 4Q17. After completing these dispositions, Ventas expects to record proceeds of more than $600.0 million. SSNOI is expected to rise 1.5%–2.5%. Analysts expect the company to report FFO of $1.04 per share in 3Q17 and $4.17 per share in fiscal 2017.

Healthcare Trust of America didn’t provide any guidance for fiscal 2017. Analysts expect it to report FFO of $0.40 per share in 3Q17 and $1.63 per share in fiscal 2017.

The three REITs, along with Public Storage (PSA), make up 26.0% of the iShares Residential Real Estate Capped (REZ). The ETF has a 98.8% exposure to REITs and has a broad, diversified portfolio.

In the next part of this series, we’ll look at the expense and income side of these REITs.

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