Acquisitions Could Be Coming for These REITs: Will Ventas, HCP or Healthcare REIT Be The Buyer?

Is Mr. Market hinting these recently listed healthcare REITs may be next in line?

Jun 10, 2014 at 3:20PM

More and more baby-boomers are reaching retirement age each day. The Affordable Care Act has made health insurance available to millions of formerly uninsured Americans. Big Pharma and medical researchers continue to make discoveries which may lead to increased life expectancy for members of all age groups.

Factors such as these paint a rosy long-term picture for companies who profit from health care delivery in the U.S.

One way investors can benefit from these trends is by owning shares in the real estate investment trusts, or REITs, who own and lease medical facilities. REIT landlords are required to pay-out at least 90% of taxable income in the form of dividends to shareholders. Cha-ching!

Healthcare real estate is big business
Recently, $19 billion market cap Ventas, (NYSE:VTR) announced the $2.6 billion purchase of American Realty Capital Healthcare Trust, or ARC Healthcare.

In the real estate investing world, bolting on acquisitions that are accretive to earnings can be a great way to enhance shareholder value. Smaller health care REITs which own senior housing, skilled nursing homes, medical office buildings, urgent care clinics, and hospitals may become prime acquisition candidates.  

The Big Dogs have performed well so far in 2014
Ventas is one of the big three health care REITs. The other two REITs with market caps in the ~$19 billion range are dividend aristocrat HCP, Inc. (NYSE:HCP) and Healthcare REIT, (NYSE:HCN).

VTR Year to Date Total Returns Chart

Big companies with large appetites
Healthcare REIT announced plans to acquire approximately $414 million of seniors housing and medical office properties in the second quarter of 2014. The anticipated acquisitions are expected to include approximately:

·       $199 million of seniors housing triple-net lease properties.

·       $162 million of medical office properties.

·       $30 million of post-acute care properties.

·       $23 million in Canadian seniors housing operating property, where HCN will be the majority owner.

On June 2, 2014 Healthcare REIT completed a $1 billion overnight stock offering -- the largest so far by any listed company during 2014.

The Dividend Aristocrat
HCP has rewarded shareholders with 29 consecutive years of dividend increases. Dividend Aristocrats must be members of the S&P 500, have a market capitalization in excess of $3 billion and have increased dividends every year for at least 25 consecutive years.

HCP recently announced a $1.2 billion strategic joint venture, or JV, with Brookdale Senior Living. At inception, the JV will own 14 continuing care retirement communities, or CCRCs. These ~7,000 units include a mix of: 67% independent living, 18% skilled nursing, 11% assisted living and 4% memory care. Brookdale and HCP will own 51% and 49%, respectively.

AVIV Year to Date Total Returns Chart

Ripe for merger or acquisition?
Executive Chairman of ARC Healthcare Nick Schorsh -- a major M&A player in the REIT world  -- inked a deal with Ventas barely three months after its March 2014 IPO. Two companies that could be next in line are:

1.     Chicago based Aviv REIT is a ~$1.6 billion market cap company specializing in owning skilled care nursing facilities, or SNFs. Aviv's business model is to triple-net lease these facilities to experienced operators. Currently Aviv owns a portfolio of 303 properties in 29 states leased to 39 tenants.   

2.     Physicians Realty Trust has a primary focus on owning and developing medical office buildings, or MOBs, clinics, hospitals, and related health care facilities. This ~$450 million market cap REIT owns 46 buildings containing almost 1.7 million square feet --  which are ~94% leased with an average remaing term of almost 10 years. Physicians Realty CEO John Thomas formerly was Executive Vice President-Medical Facilities Group for Healthcare REIT.

AVIV Price Chart

Investor Takeaway
Conservative investors may tend to gravitate toward the investment grade rating, seasoned real estate portfolios, and reliable dividend pay-outs that bellwether health care REITs: Ventas, Healthcare REIT, and HCP can offer.

However, Physicians Realty Trust and Aviv REIT do offer investors a chance at higher total returns if they are able to execute and grow profitably. These smaller companies may or may not end up as take-over candidates, however, they both appear to be REITs that should be on the radar screen of investors interested in this sector.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends Health Care REIT. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers