Healthcare REITs are REITs that specialise in various types of healthcare properties such as hospitals, nursing homes, medical centres and assisted living facilities for the elderly and disabled.

Healthcare REITs are not usually engaged directly in the business of providing these healthcare services, but are instead leasing out its properties, usually on a long-term basis.

These tenants could be either a single master lessee of the facility, or multiple tenants renting strata units within the property

In the US REIT market, healthcare REITs are usually further differentiated into either skilled nursing facilities (SNF)-centric or medical office buildings (MOB)-centric REITs, although a number of REITs have also been constituted with both property types.

Assessing healthcare REITs

As life expectancy increases, demand for assisted living facilities, hospitals and medical care facilities are expected to rise in tandem.

The rise of a newly affluent middle class in many countries is also feeding into the demand for better healthcare facilities, such as those that are run by private enterprises.

Healthcare REITs that depend largely on a single master tenant are considered most risky as the loss of that tenant could mean a lengthy period of vacancy on its properties.

A healthcare REIT that has a stable of properties located over several countries are more well-mitigated against sudden changes in legislations governing the healthcare sector in one particular country.

Healthcare REITs also tend to enjoy high barriers to entry.

However, healthcare policies in some economies are notoriously prone to shifts in political pressures, and as such, performance of healthcare REITs are known to be prone to these shifts.

This entry is part of REITsWeek's glossary of REITs and real estate investment terms.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.