Healthcare REITs: Stuck In Rehab

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• Following three straight years of underperformance, healthcare REITs showed signs of life in 2018. The early tremors of the long-awaited demand boom are finally beginning to appear.
• The investment thesis related to the “aging population” has been no secret. The healthcare real estate industry  - especially senior housing –continues to battle an “addiction” to new supply growth.
• For senior housing, supply pressures are expected to linger throughout 2019 as expense growth continues to outpace revenues. These REITs have been reluctant to call a bottom to fundamentals.
• Operator struggles and policy uncertainty continues to trouble Skilled Nursing and Hospital REITs. Don’t expect the political rhetoric or uncertainty to moderate heading into the 2020 presidential election cycle.
• The REIT Rejuvenation - and its impact on equity valuations – should be a jolt of adrenaline for a sector that relies on a strong cost of capital to fuel external growth.