Nashville-based MedEquities Realty Trust is contemplating a sale of the company at a time when REIT mergers and acquisitions are expected to reach their cyclical peak.
The company has invoked the help of an adviser to evaluate its options, according to anonymous sources as reported by Bloomberg. MedEquities owns and invests in an assortment of healthcare properties, including acute-care hospitals, short-stay and outpatient surgery facilities, specialty hospitals and more. The company’s portfolio consists of 33 assets scattered throughout California and Texas.
MedEquities Chairman and CEO John McRoberts told Nareit in a video interview at the REITweek: 2018 Investor Conference that fundamentals in the healthcare segment remain healthy, presenting opportunities in the acute and post-acute healthcare segments in particular.
“We see a lot of opportunity in the acute and post-acute sectors, including skilled nursing. The rest of that space is very active and growing, fortunately for us,” McRoberts said during the interview. “We have a very good balance sheet. Of course the equities market in the healthcare space has not traded at all, so access to capital is not readily available from the equity markets. But our balance sheet is in very good shape so we don’t need access to it right now, so we’re very fortunate in that regard.”
The company’s share price increased 4% to $10.42 Wednesday mid-morning following the news, Bloomberg reports. By Thursday, the stock opened at $10.35, up from Wednesday’s close of $10.33, but was trading down by mid-day.
Other REIT M&A deals announced this year include warehouse owner Prologis’ $8.4B acquisition of DCT Industrial Trust, Greystar Student Housing Growth and Income’s acquisition of Education Realty Trust and Healthcare REIT Welltower Inc.’s purchase of senior housing REIT Quality Care Properties for $2B in cash.
The aggressive M&A environment is being fueled by a number of factors. For one, asset managers have found merging with a competitor can be a cost-effective way to increase market share and expand their presence both domestically and globally.
Taking into account the extended period of economic growth the U.S. has been experiencing, exorbitant asset prices and a frustrating bid-ask spread that is making it harder for investors to get the returns they want, there is an excess of dry powder in funds searching for deals.
“That’s resulting in a strong environment for REIT M&A. Public companies are trading at discounts of [their] net asset value. [This] provides an opportunity for buyers to come in and pay a premium on the existing share price and still pay a price that is at or below the net asset value. That is a compelling opportunity for buyers,” Greenhill & Co. Head of Real Estate Corporate Advisory Adam Troso previously told Bisnow.
