The public equity market for senior care operating companies and REITs is getting slammed, but the private investment market remains strong.
The pricing disconnect continues. Public equity investors continue to slam the senior care operating companies and health care REITs. All one has to do is look at what has happened to Kindred Healthcare and Genesis Health this past week or two, when both companies dropped to new lows and have not yet recovered. Fears of reimbursement pressure, fears of OIG investigations, fears of staffing costs. All have some degree of merit, but it seems like an overreaction to me. Just look at the private market, where both acquisition pricing and demand remain high. Not that private market buyers are fearless. But I would say they understand the market better, they understand the risks better, and they certainly don’t move with a herd mentality. And perhaps more importantly, they know value when they see it, and they have more time to wait for their return than their public market investor counterparts. And the REITs? They have survived much worse times, and a potential 25 basis point increase in rates in December will not hamper their business. But with investors running for the hills, it sure does make me want to invest at these low levels and high yields. What is hard to predict is when the disconnect ends, and which way the market goes as a result.