HCP CEO: Demographic Trends in Health Care Attractive to Investors
11/17/2014 | by Sarah Borchersen-Keto

Lauralee Martin, president and CEO of HCP, Inc. (NYSE: HCP), joined REIT.com for a CEO Spotlight video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Martin predicted continued interest in the health care sector for 2015.

“There’s a lot of money that’s interested in health care. It’s a sector that has demographics that are very attractive to investors,” Martin observed.

At the same time, the rental structure in health care is generally triple-net leases, “which is an easier structure for many investors to understand in terms of the returns that they will get,” Martin noted. “When you put the yields on those assets together with a low interest-rate environment, it has a great deal of appeal.”

Martin also addressed changes in how companies are approaching the senior housing sector.

Operators are becoming more sophisticated, according to Martin, adding that the trend is visible at HCP’s largest operator, Brookdale Senior Living Inc.

“They are clearly advancing across the continuum of care. They’ve thought about branding so that the image is understood and valued,” she said. “That sophistication makes the industry very attractive,” she said.

Martin noted that for investors, the senior housing sector has many characteristics that are similar to the apartment sector, “with some nuances that really add some operator value to that space as well.”

Looking forward, Martin emphasized the importance of the changes that are occurring in health care delivery and the push for higher-quality care at the lowest cost. “It’s a value equation,” she said.

A clear benefit for HCP’s medical office segment, according to Martin, is the fact that 94 percent of the portfolio is affiliated with approximately 200 hospital systems. Martin noted that hospital CEOs and administrators “are really going to be driving care in the future.”

As a result, according to Martin, hospitals will be more focused on branding, market share and developing their capabilities across the delivery system. That, in turn, could lead to a “rationalization of real estate assets,” Martin said, “which we think is going to create opportunity.”