Alan Brochstein

Healthcare REITs: Still Doing Well, But Will That Trend Continue?

Good points, Donald. Yes, the downside scenario to which I alluded in my comment above has certainly been playing out. REITS in general are a broken business model, and, as you point out, the risk levels are extremely high even in this area that has generally been perceived as safer. The original buy idea early in the year worked because we were just in a recession, but this second article warning of potential downside proved timely because we are now in depression.

Healthcare REITs: Still Doing Well, But Will That Trend Continue?

The whole group has collapsed along with REITs in general. Even REITS with relatively smaller amounts of debt are getting hammered. The ability to roll over debt down the road is being questioned by the market. The prices seem insane to me, but that is the kind of world we are living in. No one wants to lend to anyone.

Healthcare REITs: Still Doing Well, But Will That Trend Continue?

OUCH... Two weeks later, and it looks like scenario two has kicked in: Absurd free-fall. While the S&P 500 has fallen about 2.5% in the past two weeks (from 10/10 close), this group has fallen 18% on average and at the median. As I suspected, with no such thing as a safe haven, investors saw that these stocks weren't down that much, so they sold. Cogdell and Alexandria were the hardest hit at 29% and 27% respectively, while the best performer turned out to be one I highlighted, NHI, falling just 3.7%. I ended up buying BMR at 17.5, well below the 21 at the time of this article but much higher than the close of 15.60 yesterday.

Healthcare REITs: Still Doing Well, But Will That Trend Continue?

I wanted to follow up regarding an observation that I made about one of the companies in the sector, MPW. I was concerned looking at the high payout ratio and the very high dividend (too good to be true???), especially given my awareness of a problem with a hospital in Houston (two buildings). A representative from the company contacted me to clarify the situation. I learned that the payout ratio is overstated due to several one-time charges that the company recognized in Q2. According to the Finance Director, the company has no significant debt repayments due in the next few years, which is encouraging. I am not in a position to suggest that MPW merits investment, but I did want to share the company views for anyone who is contemplating investment.