REITs Announce Share Repurchase Programs

Amid the cratering of share prices across most industries, a couple of healthcare REITs announced share repurchase plans. LTC Properties announced that its Board of Directors approved a share repurchase plan involving an aggregate of up to five million of its outstanding shares of common stock. The company made the plan public on March 12th, when the company’s stock price closed at $29.53 per share, down from $48.84 per share on March 5th. Its stock price has since fallen a little further, hitting bottom (we hope) at $24.49 on March 18th, the same day when most stock indices also reached their near-term lows. LTC plans to use the proceeds from several asset sales to execute on some of the share repurchases. 

CareTrust REIT also announced a repurchase plan on March 20th, with its Board of Directors authorizing the repurchase of up to $150 million of its outstanding shares of common stock prior to March 31, 2023. The company plans to finance these transactions using available cash and short-term borrowings from its $600 million revolving credit line. CareTrust’s stock price also seems to have bottomed out on March 18th at $7.16 per share, or 69% lower than its March 5th closing price of $22.88 per share. As of the end of March 20th, the share price has rebounded 88% to $13.47 per share. 

Given that these companies are heavily undervalued at this time, since a lot of the sell-off was more fear-based than logic, a share buyback program does not seem to have much downside. But if these companies believe this is the best use of their cash, they must feel pretty secure in their tenants continuing to make rent and that any short-term capital expenditures to deal with the pandemic will be covered. 

 

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