Should REITs be using excess cash to buy back their shares at cheap prices, or wait and go bargain hunting for cheap properties?
Good morning. I am in day nine of my 14-day self-quarantine, and have yet to go stir crazy. Apparently, in Connecticut, liquor stores are exempt from the shut-down. Hmmm.
While we hear anecdotally that occupancy levels in seniors housing remain relatively unchanged, I do not see how that will remain so in the coming weeks and months. Companies and owners, such as REITs, are just beginning to report confirmed cases of COVID-19, along with the unfortunate deaths. While expected, we still continue to hope they can keep it to a minimum.
One thing I am a little surprised at is the announced stock buybacks by some REITs. Yes, their share prices plunged and represent an “opportunity” to lower their share count at bargain prices. However, I really think the long-term opportunity will be in what they do best. Buying real estate. After an unprecedented 10-year bull market, I believe we are finally going to have a pricing re-set, but for reasons no one could have predicted. If investing in seniors housing and other healthcare real estate was my focus, I would be preserving my cash for value-hunting in the future, as crass as that may sound in today’s environment.