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Nearly 40 million Americans invest in REITs

Growing Demand and Not Enough Supply in Medical Real Estate

12/18/2012 | By Allen Kenney

David Hegarty, president and COO of Senior Housing Properties Trust (NYSE: SNH), joined REIT.com for a video interview at REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.

Hegarty offered some insight into the drivers behind his company's focus on "private-pay" customers. Senior Housing's portfolio consists of two-thirds senior living assets and one-third medical office buildings.

"Our focus has really been trying to capture the people age 80 and up in the private-pay senior living sector and people age 65 and up for the medical office building part of our portfolio," Hegarty said. "The demographics continue to be the wind at our backs for the next several years. The fact that there is very limited new development in either space should benefit. We expect that demand will exceed supply for the next several years."

Hegarty discussed Senior Housing's acquisitions strategy. Hegarty pointed out that the company is the fourth-largest company in the health care sector.

"There's a pretty sizeable gap between the Big Three and ourselves. We like to use that to our advantage, because we can still pursue the $10 million to $15 million transactions and face somewhat limited competition for that product," Hegarty said. In the past year, the company has done approximately $400 million total in acquisitions in that price range.

Hegarty offered his thoughts on the different sides of the senior housing business and which sides might be more profitable in the near future.

"Certainly the private-pay senior living should do quite well. Many of the properties are in great MSAs around the coutry. I fully expect those to do very well over the next several years," he said. "We have some assets in the portfolio that are more closely aligned to some group physician practices."

Hegarty said such an arrangement is generating increased competition from hospitals.

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