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Ventas' (VTR) Life Science Asset Investments to Stoke Growth
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Healthcare REIT – Ventas Inc. (VTR - Free Report) – is making investment for its future prospects through selective development and redevelopment. The company is focused on fortifying its position in the medical office and life science real estate market.
In fact, in the second-quarter 2017 earnings release, the company announced that it expects to invest by funding around $350 million in development and redevelopment projects for full-year 2017. This would include lucrative new ground-up medical office and life science developments.
Notably, university-based life science real estate is a new zone of investment, which has grabbed attention and Ventas has already made decent amount of investments in this segment. Such investments offer 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.
On the other hand, Ventas reaffirmed the expected sale of 36 skilled nursing facilities (SNFs) for $700 million. These SNFs are currently being operated by Kindred Healthcare Inc. . The move is in sync with Ventas’ strategy of “de-emphasis” of this particular healthcare real estate category.
Notably, amid healthcare reforms, though seniors housing, medical-office buildings and hospitals have been able to reap solid top-line growth in recent years, skilled nursing facilities are becoming more susceptible to top-line pressure due to the change in medical billing procedure. The company successfully spun-off majority of its SNF business in 2015 and following the anticipated sale of the aforementioned 36 SNFs, Ventas will be able to bring down its skilled nursing rent to 1% of the total business.
However, increase in supply of senior housing assets in certain markets remain a concern for Ventas. This is because elevated supply usually curtails the landlords’ pricing power and limits growth in occupancy level. Also, dilutive impact of asset dispositions cannot be bypassed in the near term.
Moreover, hike in the interest rate is a concern for Ventas, particularly considering its substantial exposure to long-term leased assets. In addition, rising rates increase the cost of financing acquisitions, investment and development-activity costs, and also lower the amount which third parties are ready to pay for the company’s assets at disposal.
Nevertheless, the stock has gained 6.5% year to date, outperforming 3.1% growth recorded by the industry it belongs to. The stock currently carries a Zacks Rank #3 (Hold).
Liberty Property Trust and PS Business Parks have expected long-term growth rates of 6% and 5%, respectively.
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Ventas' (VTR) Life Science Asset Investments to Stoke Growth
Healthcare REIT – Ventas Inc. (VTR - Free Report) – is making investment for its future prospects through selective development and redevelopment. The company is focused on fortifying its position in the medical office and life science real estate market.
In fact, in the second-quarter 2017 earnings release, the company announced that it expects to invest by funding around $350 million in development and redevelopment projects for full-year 2017. This would include lucrative new ground-up medical office and life science developments.
Notably, university-based life science real estate is a new zone of investment, which has grabbed attention and Ventas has already made decent amount of investments in this segment. Such investments offer 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.
On the other hand, Ventas reaffirmed the expected sale of 36 skilled nursing facilities (SNFs) for $700 million. These SNFs are currently being operated by Kindred Healthcare Inc. . The move is in sync with Ventas’ strategy of “de-emphasis” of this particular healthcare real estate category.
Notably, amid healthcare reforms, though seniors housing, medical-office buildings and hospitals have been able to reap solid top-line growth in recent years, skilled nursing facilities are becoming more susceptible to top-line pressure due to the change in medical billing procedure. The company successfully spun-off majority of its SNF business in 2015 and following the anticipated sale of the aforementioned 36 SNFs, Ventas will be able to bring down its skilled nursing rent to 1% of the total business.
However, increase in supply of senior housing assets in certain markets remain a concern for Ventas. This is because elevated supply usually curtails the landlords’ pricing power and limits growth in occupancy level. Also, dilutive impact of asset dispositions cannot be bypassed in the near term.
Moreover, hike in the interest rate is a concern for Ventas, particularly considering its substantial exposure to long-term leased assets. In addition, rising rates increase the cost of financing acquisitions, investment and development-activity costs, and also lower the amount which third parties are ready to pay for the company’s assets at disposal.
Nevertheless, the stock has gained 6.5% year to date, outperforming 3.1% growth recorded by the industry it belongs to. The stock currently carries a Zacks Rank #3 (Hold).
Key Picks
Investors interested in the real estate space can also consider stocks like Liberty Property Trust 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.
Liberty Property Trust and PS Business Parks have expected long-term growth rates of 6% and 5%, respectively.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>