Troubles Everywhere

This week can go down as one of the worst we have seen in the seniors housing and care market. Putting aside the nearly $10 billion drop in market value of the healthcare REITs and senior care companies, when analysts start asking HCP, Inc. whether they think HCR ManorCare, its $6 billion tenant (well, now closer to $5 billion), may have to file for bankruptcy protection, you know that things are out of whack. The problems at HCR ManorCare, among other things, sent HCP (and some of the other healthcare REITs) into a nosedive. At one point Thursday, HCP’s yield was just over 9.0%, something that is shocking to most people. Now, three of the healthcare REITs yield more than 10%, with a few more approaching that level. Since REITs had been setting the tone in the acquisition market, at least until the second half of last year, this new development is shaking up the M&A market in terms of pricing, why someone would sell into a downturn, and how the lending market will be impacted, even though interest rates continue to decline. Deals are still getting done, but appetites may be shrinking until the dust settles.

 

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