A week after the sector’s largest companies reported first-quarter earnings, several analysts have shared their views on how healthcare real estate investment trusts are faring amidst the ongoing COVID-19 pandemic, according to an S&P Global Market Intelligence article.
Fitch Ratings lowered its outlook on Welltower to negative in a May 13 report, based on expectations that REITs with seniors housing operating portfolios could see occupancy declines ranging from 200 to 400 basis points — potentially higher than the rating agency’s original expectations. Fitch already had reported negative ratings outlooks on Ventas and Sabra Health Care REIT earlier this month, the ratings agency noted.
Fitch noted that it expects a W-shaped recovery at the seniors housing facility level as the timing that access restrictions are lifted and reinstated will vary across markets due to local coronavirus infection trends. But the agency expects a U-shaped recovery at the portfolio level as some markets will improve while others continue to decline, resulting in relatively flat occupancy rates.
“We believe demand, particularly for higher acuity settings where it is less discretionary, is being deferred and therefore will rebound,” Fitch noted in the report, adding that REITs owning skilled nursing facilities so far have experienced more cash-flow stability as a result of significant government support.
Mizuho Securities USA analyst Omotayo Okusanya reiterated “buy” ratings on Sabra and another major skilled-nursing owner, Omega Healthcare Investors. He noted that although rents will come under pressure, government aid should help the REITs’ operator tenants remain solvent.
SMBC Nikko analyst Richard Anderson, meanwhile, downgraded his rating of Welltower’s equity to “neutral” while upgrading shares of Healthpeak Properties to “outperform” and LTC Properties to “neutral” from “underperform.”