Blog and News

POST WRITTEN BY | Chuck Sudo | Forbes

The transition of healthcare real estate to a convenience-based model in recent years has been driven by two primary factors: a shift in the balance of inpatient and outpatient revenue streams, and data analysis. Taking care of patients today can be as much about technology and records sharing as it is about doctor-patient interactions.

Gensler Design Director Randy Guillot said the shift in revenue generation toward outpatient care has larger healthcare groups focusing on personalized care for the aging baby boomer market. More capital these days is being earmarked for tech and wellness-based care because boomers are demanding a personal touch with regard to access to medical records and telemedic...

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Cantor Fitzgerald
Equity Research
June 12, 2017

Gaurav Mehta, CFA | 212-915-1221 | gmehta@cantor.com

REITs

Takeaways from REITWeek 2017
Adjusting Estimates, Industry Update, Raising Price Target

Investment Summary. We attended REITWeek 2017 in New York, NY, from June 6-8, and held meetings with management teams in Industrial, Lodging, Multifamily, Manufactured Homes and Self-Storage sectors. Below we highlight sector-level themes based on those discussions.

  • Industrial REITs. Positive demand drivers include e-commerce (e.g., products staying in warehouses, last mile delivery), shortening of supply chain and an increase in manufacturing activity. Markets that could have supply pressure include Atlanta, Dallas, Miami, and Inland Empire. For 2017, we expect supply and demand to be in equilibrium. STAG (Neutral) continues to experience product flow in the acquisition market that should drive external growth, and it expects rent growth in the secondary markets to exceed that in primary markets.
  • Lodging REITs. There is cautious optimism about lodging demand. Debt markets, including CMBS lending, are relatively open, although lending is challenging for construction. Asset recycling continues for Summit Hotels (Overweight), with the company seeing products in the acquisition market, while Chatham Lodging (Neutral) could sell older assets and redeploy capital into relatively new assets.
  • Multifamily REITs. Post 1Q trends are in line or slightly ahead of multifamily REITs expectations. Although there was a decline in transaction volume in 1Q, there could be some increase in activity. Construction costs have increased and lending standards remain tight. By markets, Seattle remains strong. MAA (Overweight) continues to experience an improvement in new leasing trends and expects further improvement during the peak leasing season. Outside of acquisitions and developments, external growth includes redevelopments for MAA and preferred equity investment program for ESS (Overweight) - both at attractive returns, in our view.
  • Manufactured Homes REITs. Trends remain stable for Equity LifeStyle (Neutral), with increases in occupancy and steady rent growth and with availability of financing from Life Insurance companies, GSEs and secured lenders.
  • Self-Storage REITs. Post 1Q operating trends are in line with the companies' expectations. Same-store growth continues to moderate, but the rate of deceleration has slowed. Public Storage (Neutral) is experiencing some softness in demand, while CUBE (Overweight), EXR (Neutral) and LSI (Neutral) view demand as steady. New rent growth is modest and depends on selected markets (e.g., according to PSA (Neutral), Houston asking rents are down 20.0%, while West Coast markets are strong). Renewal rates remain stable at 8-10%. Product flow in the acquisition market is slow, reflecting a disconnect between buyer and seller expectations, and it is of lower quality. As a result, acquisition volumes could fall in 2017. Cap rates have likely expanded by 50-75bps (vs. 2016), according to PSA. Private equity remains active in the self-storage transaction market, however, and could lead to acquisitions via JV (e.g., LSI has acquired assets in a JV for $493m YTD). There is an increase in demand for third-party management, reflecting moderating growth for the private operators, and, as a result, we expect continued expansion. New supply estimates include 600-800 stores to be delivered in 2017, followed by 600-800 stores in 2018 vs. approximately 600 stores delivered in 2016, according to EXR.

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Written By Randyl Drummer | CoStar

Howard Lutnick, chairman and chief executive of Newmark Knight Frank parent company BGC Partners, Inc., (Nasdaq: BGCP), this week said he expects the planned spin-off of Newmark as a separate publicly traded company to occur in the fourth quarter.

"We would like to do the initial public offering of Newmark in this calendar year," Lutnick said this afternoon during a presentation at the Sandler O'Neill + Partners Global Exchange & Brokerage Conference in New York City.

"You can assume that's not going to be the summer because it's unlikely we'll take a company public in August, and we're not going to do it at Christmas. Somewhere in late September, October, November would be the kind of time frame we're ...

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Written By Dave Barkholz | Modern Healthcare

Finishing work on big projects in Detroit, El Paso and San Antonio, Tenet Healthcare Corp. is about to throttle back capital spending for hospitals to the tune of $150 million. Tenet's 2017 capital budget is expected to range between $700 million and $750 million. That doesn't mean the nation's third-largest investor-owned hospital company is done spending on healthcare facilities though. In fact, it's just the opposite on the ambulatory side.

Tenet plans to open 15 free-standing emergency departments or micro-hospitals over the next 18 to 24 months, as well as add urgent-care centers in its hub markets, Eric Evans, president of hospital operations, said in a recent earnings call. He added tha...

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Written by: Garth Hogan, Executive Managing Director, Global Healthcare Services

2017 BOMA Medical Office Buildings and Healthcare Real Estate Conference

Transformation and Evolution – The Newmark Knight Frank Global Healthcare Services team attended the 2017 conference in full force this year while BOMA had record attendance of over 1,200 in Denver Colorado. Compliance, leasing, trends in healthcare design and development strategies were some of the subjects covered. Politics seemed to be absent from the panel discussions, even with the uncertainty of the effects of possible healthcare reform part 3,4 and 5. In our conversations, we heard more about concerns with the impacts of telemedicine and capital constraints and that hospita...

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Making the decision to renovate, redevelop or raze underutilized health care facilities

May 3, 2017 Michael Hanley, AIA, LEED AP BD+C and Randy Guillot, FAIA, LEED AP

Dotting the landscape throughout this country are underutilized or shuttered health care facilities. Although there are no hard data detailing their provenance, many likely were built between the late 1940s and late 1980s and can be traced to the Hill-Burton Act of 1946, which ignited a health care building boom.

What becomes of these buildings that are mothballed or rendered obsolete by an array of circumstances and challenges that includes everything from declining reimbursements to a rapidly changing model of care to deferred maintenance?

Tired building stock should be ...

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Written by Morgan Haefner | May 15, 2017 | Becker's Healthcare

Ascension's operating income climbs 41%: 5 things to know

St. Louis-based Ascension reported an operating margin of 3.8 percent for the nine months ended March 31, compared to an operating margin of 2.8 percent for the same period a year earlier, according to unaudited financial documents.

Here are five things to know about Ascension's most recent financial results.

1. The roughly 140-hospital system partially attributed its operating results to a year-over-year increase in net patient service revenue of $990 million. Ascension said the increase represents an uptick in inpatient and outpatient volumes from its acquisition of Glendale, Wis.-based Wheaton Franciscan Healthcare-...

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Newmark Knight Frank (NKF) and its Global Healthcare Services group has recently published its 2017 Healthcare Outlook report, and has found that despite copious uncertainties in healthcare legislation, demand for healthcare real estate investment sits at an all-time high. There is also an increased demand for capital and cost reduction, driven by consolidation and the need for innovation, which is related to consumer demands for improved access and better patient outcomes. A transition has also been taking place in construction, rental rates and absorption, as consumer demands and trends continue to evolve. The report goes into detail on four key trends outlined by the Healthcare Financial Management Association (HFMA): transition to va...

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FOR MORE INFORMATION: RICHARD GERAKITIS RGERKITIS@NGKF.COM OR DANA HAMRIC DHAMRIC@NGKF.COM

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2017 Healthcare Real Estate Outlook