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Believe it or not, medical REITs are still some of the best REITs to invest in now. They might be down amid COVID-19, but it should be looked at as a temporary discount.
The U.S. population is aging. The older we get, the more medical care we need. Most medical care takes place indoors, so we were clearly going to need more medical facilities.
When the virus hit, hospitals were overwhelmed. Their cashflows were interrupted. Investors started questioning whether medical REITs can still survive.
But healthcare is not disappearing. In fact, it's going to see tremendous growth down the road. And there's no better example of that than these two top medical REITs today.
The top REITs are going to outlast the pandemic. And when they do, they'll be alive and kicking. That's why there's no time to waste in checking them out.
These two REITs have performed well over the last decade. And their portfolios are big enough to reward investors in the years to come.
Get them while they're still down…
Medical Properties Trust Has Earned 500% for Investors
Many feared that hospital REITs like Medical Properties Trust (MPW) would have a difficult time surviving.
Medical Properties saw its price fall by almost 50% when the sell-off started back in March. Medical Properties owns 389 facilities and more than 41,000 licensed beds in eight countries, across three continents. It is the second-largest owner of hospitals in the United States.
Most of its facilities are general acute care hospitals – or facilities that patients go to for surgeries, acute medical conditions, and other illnesses and injuries that typically require short-term stays. These are precisely the kinds of facilities that had the biggest battle with COVID-19.
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Medical Properties Trust has been a best-in-class REIT. Since its IPO in 2005, its shares have provided total shareholder returns of greater than 500%. The shares have bounced back from the lows and are up 21% on the quarter and down just 12% on the year. At the current price, the dividend yield is over 5%.
While Medical Properties trust has managed to weather the storm so far, the pandemic is still with us and could be until we get a vaccine. There could still be some bumps ahead for the leading hospital REIT.
That's why you have a couple options when it comes to the best medical REITs…
Global Medical REIT Saw 975% Growth in 5 Years
Investors might want to look at Global Medical REIT Inc. (NYSE: GMRE). Global Medical has a different approach to medical real estate than most medical REITs.
It wants purpose-built healthcare facilities leased to strong healthcare systems and groups with a leading market share in secondary markets. It wants to own the go-to facilities in the smaller towns where you can go to their facilities or drive 50 miles into the city to get care.
It wants its tenants to be the best practice in town, with the best care and the best financial condition.
Global Medical wants to take advantage of the trend toward surgical and care centers instead of overnight hospital stays. Surgeries that used to require a three-day stay 10 years ago do not even require an overnight stay today. Global Medical wants to own those facilities in secondary markets. It will be the first choice of residents who do not want to drive for their procedures.
This REIT seeks to own medical office buildings, labs, vison care centers, and other facilities that are part of a regular healthcare program.
Global Medical's strategy appears to be working. The REIT has made several smart acquisitions since its IPO in 2016 and has grown the portfolio from $93 million of property to over $1 billion today. The compound annual growth rate of the property portfolio has been over 80%.
Global Medical also underwent a significant change recently. The REIT switched from external management to internal management. With external management, it was paying an outside manager a fee to manage the REIT. While it is a common structure in the REIT industry, it is not always best for shareholders.
It bought the company that was managing the portfolio for just $18 million. All of these folks are now employees of Global Medical with a stronger incentive to increase profits and dividends. The elimination of the incentive fees should also decrease general and administrative costs at Global Medical.
Medical Properties Trust is an excellent REIT that has done well for shareholders. However, Global Medical is probably the better choice for investors looking for exposure to medical real estate.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.