A surge for healthcare REITs after repeal-effort sputters
House Speaker Paul Ryan (R-WI) championed the failed bill.
The recent failure of the GOP's American Health Care Act has left the healthcare industry in a period of pause that's likely to benefit real estate investment trusts, according to observers.
In a review published in late March on investment analysis website Seeking Alpha real estate advisor Hoya Capital Real Estate reported that healthcare REITs experienced a “rally” of 3.5% following the act's failure in the House, since “status quo in healthcare policy is generally seen as a positive.”
That status quo was expected to be particularly beneficial to REITs dealing in the skilled nursing sector, Hoya Capital reported.
Uncertainty surrounding reimbursement policies can hit trading especially hard, the advisor noted.
A 2016 report from credit rating agency Fitch Ratings speculated that REITs would become increasingly cautious around skilled nursing portfolios due to potential sector pitfalls such as lower reimbursement rates, pilot programs launched as part of the Affordable Care Act and ramped up efforts from federal officials to probe providers' billing practices.
Healthcare REITs Ventas and Welltower ranked as the two best performers the week the plug was pulled on the GOP's American Health Care Act. Omega Healthcare Investors, HCP Inc. and Care Capital Properties also landed spots on Hoya Capital's best performing list.
The status quo surge for healthcare REITs follows statements made by Care Capital Properties CEO Ray Lewis in December that he was “very optimistic” about the sector's future after President Donald Trump's election.
Speaking with REIT.com, Lewis added that he believed value-based initiatives would continue driving residents to skilled nursing settings, since “the policy tailwinds that are great for our business long-term remain intact post-election.”