Real estate investment trusts (REITs) own, operate or finance income-producing real estate; they avo...
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07/11/2016 7:00 am EST
Our latest new recommendation offers a yield that cannot be beat, while taking advantage of the growing demand for healthcare services and senior housing, asserts Jimmy Mengel, editor of The Crow's Nest.
Senior Housing Properties Trust (SNH) was founded in 1986, has been publicly traded since 1999, and considered investment-grade since 2001.
The company owns independent living and assisted living communities, continuing care retirement communities, nursing homes, wellness centers and medical offices, and clinic and biotech laboratory buildings located throughout the United States.
The majority of the properties are triple-net leased, meaning that each tenant pays rent, while also being responsible to pay all operating costs, taxes, insurance and maintenance costs that arise from the ownership and use of our property.
SNH has a wide geographic base, with approximately 640 tenants in 428 buildings in 43 states and Washington, DC. In total, these properties represent a $7.5 billion investment portfolio.
As an added perk, the company is not constrained by tightening government funding. Roughly 97% of net operating income comes from private pay properties.
Nor are there a lot of complicated deals or hidden issues. SNH has no ground leased properties, no joint ventures, and only 57 out of the 428 properties — 13% of the portfolio — are tied to mortgages and capital leases.
While SNH has one of the highest yields among its peers — currently 7.8% –– the forward funds from operations payout ratio has drastically improved, hitting 81% in the 1st quarter of 2016.
The increasing excess cash flow protects the high yield going forward, while improving management’s capacity to internally invest and manage deb
Overall, we believe that this investment will see share appreciation due to demographics, underlying medical and senior living demand growth, and consistently improving results.
We’re adding Senior Housing Properties Trust to our model portfolio as a high-yield play.
By Jimmy Mengel, Editor of The Crow's Nest
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