Health Care REIT (HCN) is expected to benefit from rising interest rates thanks to the real estate investment trust’s exposure to seniors housing, and the company’s strategy for growth looks attractive to Daniel Bernstein, Analyst at Stifel, Nicolaus & Co., Inc.
“Our top pick today is Health Care REIT in the REIT sector. It’s an $18 billion market cap health care REIT. Post their acquisition of Revera Properties in Canada, they’re getting about 38% of their NOI from seniors housing operating assets, so we think the portfolio will benefit from rising interest rates, and again, the good underlying fundamentals in seniors housing,” Bernstein said.
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Bernstein says HCN has a relationship-driven acquisition model, which allows the company not to rely on those large acquisitions for growth, even though they have engaged in a large number of them.
“They get a significant amount of acquisitions from their existing relationships at better-than-market prices, and so we continue to see them be attractive with 5% better FFO and FAD growth, similar dividend growth and a potential for them to continue to improve their valuation versus peers,” Bernstein said.
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