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Ventas to Gain from Life Science Real Estate Investments

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Ventas Inc. (VTR - Free Report) is enhancing its position in the life science real estate market. In fact, in a recent CEO Spotlight video interview at REITWeek 2017 of REIT.com, the company’s CEO, Debra Cafaro, highlighted that the company has forayed into some “exciting” business lines over the past 12 months.

Particularly, university-based life science real estate is a new zone of investment that has grabbed attention and Ventas has, by now, already committed nearly $2 billion to this segment. The company’s investment in South Street Landing in Providence, RI, in recent times is a testimony to this. Situated in the Brown University campus, South Street Landing offers high quality facilities for medical training. The property is fully preleased by Brown University and the University of Rhode Island.

Additionally, last year, Ventas completed the acquisition of significantly all of the life science and medical real estate assets of Wexford Science & Technology, LLC., from Blackstone Group LP (BX - Free Report) , for $1.5 billion in cash. This buyout marked the company’s foray into the flourishing university-affiliated life science real estate business.

Such investments offer Ventas the opportunity to capitalize on the growing health-care-driven research and development, supported by top-tier research universities. Increasing longevity of the aging U.S. population, along with biopharma drug development growth opportunities, have also promoted the institutional life science and medical-market fundamentals. Further, long-lease terms and top rated, institutional quality tenants assure steady growth in cash flows for Ventas.

In addition to the diversification moves, the company is also witnessing “incredible wave of demand coming for all sectors of Ventas’ business, including senior housing,” per its CEO.

Ventas is anticipated to benefit from its diversification efforts, increasing healthcare spending and aging population. In addition, its strong balance sheet positions it well for growth.  However, interest rate hike remains a concern, considering the company’s substantial exposure to long-term leased assets.

Ventas currently has a Zacks Rank #3 (Hold). Shares of Ventas outperformed the Zacks categorized REIT and Equity Trust – Other industry over the past three months. During this period, the company’s shares gained 14.8%, while the industry gained 6.8%.



Stocks to Consider

Better-ranked stocks in the REIT space include DCT Industrial Trust Inc. and PS Business Parks, Inc. . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DCT Industrial Trust’s estimates for 2017 funds from operations (“FFO”) per share moved north 0.4% to $2.39, over the past 60 days.

PS Business Parks’ estimates for 2017 FFO per share inched up 1.8% to $6.09, over the past 30 days.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.


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