For those who are not seasoned investors, a REIT is a Real Estate Investment Trust, a fund that can be traded on a stock exchange like a normal share, but which trades like a share.
These are a popular way to access the growth and income streams of the property market globally in a far safer and more liquid fashion than buying real estate directly. This is because real estate is a very illiquid asset class. For private investors, a REIT is ideal, as it allows for easy trading in and out of specific commercial property markets without the headache.
The NNN Healthcare Office REIT
The NNN Healthcare/Office REITs are a good example of such. They are part of a range of REITs listed on the New York Stock Exchange (NYSE) and are managed by Healthcare Trust of America Inc. HTA (NYSE: HTA) is a large specialist in buying, owning and operating medical buildings. These properties are usually office buildings rather than hospitals, but tend to be located on key campuses. HTA has been receiving plenty of attention in the market recently, with the likes of UBS raising their rating for HTA stock from outperform to a strong buy. Most of the analysts on the street now have HTA stock at a buy or strong buy level.
Most brokers have a target price of around $34 for HTA stock. It opened at $29.83 on Friday and has a 50-day moving average of around $32. HTA is due to report its Q3 financial results on 24 October. There looks to be considerable medium term positive sentiment about the company on Wall Street.
The NNN Healthcare Office REITs are part of a range of REITs managed by HTA. The healthcare sector, on which HTA focuses, is one of the best performing of the REIT sub-sectors. Over a 10 year time frame, based on compounded annual returns, healthcare REITs made 12.9% on average. Only REITs specialising in the self-storage market did better.
And some of these REITs have achieved considerable size over the years. Consider Welltower: one of the largest REITs on the market by assets, it controls over $40 billion in specific healthcare sector properties in the United States. In Welltower’s case, it is leaning more heavily towards senior housing, as the population in the US continues to age.
The NNN Healthcare/Office REIT portfolio is also a considerable one: it is a relative newcomer, as parent HTA was only established in 2007, but benefited from being able to start building its portfolio during the real estate downturn in 2007-08. It now manages over $2.68 billion, and more than 6 million square feet of office space. That makes it the largest owner of medical office buildings in the US.
The Armchair Trader says
The US healthcare market is a huge one, and the industry that serves it is only going to get larger. On top of that, a society with an ageing population will have to spend more resources taking care of its elderly. The failure of the Trump administration to turn back the clock on America’s efforts to expand its healthcare market is just one symptom of how important US healthcare is becoming as a national and commercial issue. The NNN Healthcare Office REITs are one of a number of options investors have to take advantage of some significant long term trends in this market.