Fitch: REITs Adjust to Bundling by Selling Skilled Nursing Facilities
Most healthcare REITS are looking to be net sellers of skilled nursing facilities while some have already amended lease terms and provided debt to a key common tenant. These actions likely reflect REITs' expectation that a short - or medium-term reversal in operators' prospects is not forthcoming and tenants may need additional financial flexibility as they manage through the transition.
We expect skilled nursing margins will remain under pressure given high operating leverage despite the relatively small patient volumes affected by pilot programs so far. Surprisingly, post-acute operators were cautiously optimistic in discussions with Fitch, pointing to potential positive financial results next year.
The coming months should provide investors with meaningful data points on private market values for skilled nursing assets given REITs' disposition guidance. However, the depth of the market's demand for Genesis Healthcare's real estate specifically will be tested with both Welltower and Sabra Health Care announcing disposition plans, and HCP and Ventas, both of which Fitch presumes to be on the sidelines when it comes to skilled nursing acquisitions.