Prominent real estate investment trusts are worried about the fiscal challenges facing skilled nursing homes, and some are looking to get out of the sector, according to the Wall Street Journal.
REIT executives are nervous that Medicare and Medicaid cuts will prevent nursing home operators from paying their rent, the WSJ reported Wednesday. Health Care REIT, whose largest tenant is Genesis HealthCare, is currently in negotiations to sell $250 million in nursing home properties, according to the Journal. Senior Housing Properties Trust is considering selling all 48 of its stand-alone nursing homes.
Ventas Inc., which leases more than 300 nursing homes, has frozen its acquisitions activities in the sector.
“We have good cash flow coverage on our skilled nursing portfolio,” Ventas Chief Executive Debra Cafaro told the WSJ. “We are cautious about committing large amounts of capital right now in skilled nursing until there is a little bit more visibility on federal and state reimbursements to our tenant customers.”
Although REIT leaders are anxious about the nursing home sector, investors have been showing more confidence. Aviv REIT Inc. launched a successful initial public offering in March. Its opening share price was at the high end of its announced $18-$20 range, and the price rose 13% within hours. The company ultimately netted nearly $279 million. This shows investors are not scared off by uncertainty surrounding Medicare and Medicaid, but are focused on the growth prospects of long-term care, some analysts said.