Monday’s Massacre

Providers got hurt in Monday’s stock market massacre, but healthcare REITs across the board suffered.

We all know that Monday’s massacre in the stock market affected almost all companies. In our sector, the focus has been on providers, since they take care of the highest-risk people as this coronavirus/Covid-19 epidemic spreads. The unprecedented 2,013-point drop in the Dow was bad enough, and providers plunged as well. But so did the healthcare REITs that own their properties.

Most of the REITs in our universe dropped by double digits, compared with 7.8% with the Dow and 7.6% with the S&P 500. Diversified Healthcare Trust plunged the most, falling 17.7% on Monday. It was followed by CareTrust REIT (-15.2%), Sabra Health Care REIT (-14.4%) and Welltower (-12.3%). 

From an earnings perspective, those with more sale/leaseback structures “may” be more protected on the downside, because they should still receive their lease payments. The RIDEA portfolios have the most risk. But let’s face it, if census and cash flow shrink, providers will suffer. And if they suffer, their landlords are bound to feel the pinch, one way or another. Whether it is lower RIDEA earnings or squeezed leases, it would not be pretty. 

Capital Senior Living plunged by 44% to $1.00 per share on Monday, before recovering to end down 20%. That meant that the market cap of the company was just $30 million at one point during the day. And they have yet to report fourth quarter earnings. While some of the share prices seemed to be recovering yesterday, it was a tepid recovery. I just don’t think this is over yet. 

 

2 comments on “Monday’s Massacre

  1. Having the face of this issue be a Senior Living community in Washington is definitely not a good look for the industry. It is absolutely going to depress occupancy in the near term as people delay moves in addition to the health risks for the existing community members.

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