According to recent observations on healthcare REIT rotation and recovery by Mizuho Securities USA LLC, there has been a recent surge of interest (and stock performance) in most healthcare REIT sectors except for MOBs. While the 10-year staying range bound is likely one important culprit, the firm believes that some investors have ventured out of their comfort zone in the search for alpha — in this case, rotating into certain skilled nursing-oriented REITs: SBRA and OHI are up 16% and 13%, respectively.
The firm says that this comes off of a choppy history of underperformance, but still believes it is relevant. “We also think the performance of SBRA can continue.”
Left out of the recent recovery has been the medical office REITs, the firm continues. “Neutral-rated HR and HTA, and uncovered DOC, are down double-digits this year — in contrast with SBRA/OHI. The MOB REITs have enjoyed safe-haven status in previous years, and perhaps the next catalyst is thought to be someplace else.” The report adds that they see no change to the MOB business and the underperformance is becoming a regular inbound question.
Welltower has recently made two major announcements: QCP/ProMedica and the BKD lease restructure/transition, the firm explains. “Today notwithstanding, the stock has had a good catch-up run feeding off of these events, and now trades comfortably above NAV. While we generally like the process and the creative approach, we think there is risk the recent stock performance is premature — particularly as it relates to the BKD restructure.”