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Wednesday, April 14, 2021

MOBs of Appeal

Companies that own senior housing and care facilities are among Wall Street’s biggest gainers this year – but one analyst thinks shares of some may have reached a plateau. These types of real estate investment trusts, or REITs, have benefited from rising demand thanks to aging baby boomers and a slowdown in new construction since 2017. Wall Street has taken note. Stock gains by some of the biggest health care REITs have outpaced the broader stock market. Welltower is up 24.9% and Ventas has gained 20.9% this year. The S&P 500 is up 19.4%.

Further gains may be capped, however, by growing labor costs for senior care facilities. New construction, while slower than a couple years ago, also remains above the long-term average for the sector, BTIG analyst Michael Gorman wrote in a recent research note. A potential bright spot is REITs specialized in medical office buildings, or MOBs. “We like the fundamentals in the MOB space ahead of the other health care segments, and think they should generate more stable internal growth in the near-term,” Gorman said.

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