A recent buying spree by healthcare real estate investor Nationwide Health Properties Inc. is set to continue into 2011.
The Newport Beach-based owner of senior housing, nursing homes, hospitals and medical office buildings bought nearly $1 billion worth of healthcare real estate last year and has $243 million in deals in the works for the first quarter.
Last week, Nationwide paid $100 million to Buffalo, N.Y-based McGuire Group for six nursing home buildings in upstate New York and Long Island.
Nationwide bought $924 million worth of healthcare buildings in 2010, up 68% from 2009.
“We’re optimistic about a strong end to 2010 and another good year in 2011,” Chief Executive Douglas Pasquale said on a recent conference call with analysts and investors.
Slightly more than half of Nationwide’s buying in 2010 was of medical office buildings.
Nationwide made a big push into medical office buildings in 2008, when it bought 28 from San Diego’s Pacific Medical Buildings for $915 million.
Medical office buildings were “best protected” for the company, Pasquale said, because of expanding demand for healthcare from an aging population, as well as the stability of doctors as tenants.
Medical office buildings have held up during downturns because their tenants—from family doctors and pediatricians to specialists—don’t move around that often.
Nursing homes made up 30% of Nationwide’s investing last year at $285 million.
Nationwide likes nursing homes on a “very select basis,” Pasquale said. The company is limited by a shortage of newer nursing homes, which Nationwide prefers to invest in.
Nationwide is a real estate investment trust that passes along most profits to shareholders.
“In general, healthcare REITs had a huge year for acquisitions,” said Jeff Theiler, a senior research associate with Green Street Advisors Inc., a Newport Beach real estate research and consulting firm.
Several of Nationwide’s competitors made big deals this year.
HCP Inc., which once was based in Newport Beach and now is in Long Beach, spent $6.1 billion to buy the real estate holdings of Toledo, Ohio-based nursing home company ManorCare Inc.
Ventas Inc. of Chicago spent $3 billion to buy the real estate of Louisville, Ky.-based Atria Senior Living Inc.
Steady Pace
Nationwide’s “been keeping a steady acquisition pace throughout the year,” Theiler said.
It and rivals “are trading at a premium to their net asset value (and) are able to acquire these properties at a reasonable price for their cost of capital,” he said.
Real estate investment trusts are able to get relatively inexpensively priced debt and use their stock to make deals because their shares have been trading well, according to Theiler.
“Our investment thesis for healthcare REITs is that even with stable valuation multiples, they can grow earnings and share prices via accretive acquisitions,” said Robert Mains, an analyst with Memphis-based Morgan Keegan & Co. who covers Nationwide.
The company is “one of the most aggressive (acquirers)” among those he follows, Mains said.
Nationwide recently raised its 2010 projection for funds from operations, a profit measure for real estate owners. The company now expects $287.1 million to $288.4 million in funds from operations, up from a previous range of $282.1 million to $284.6 million.
Analysts on average expect 2010 funds from operations of $287.1 million on revenue of $427 million, which would be up 9% from a year earlier.
The company’s fourth-quarter and 2010 results are due in coming weeks.
Nationwide, which had a market value of $4.6 billion last week, owns 637 properties.
Continuing Care
The majority are senior communities that offer residents help with daily tasks. About 200 are nursing homes for sick or injured patients.
The company also owns continuing care retirement homes and specialty hospitals.
Nationwide leases its buildings to operators such as Irvine’s Sun Healthcare Group Inc., Brookdale Senior Living Inc. of Chicago and Alabama-based Healthsouth Corp.
