Thanks Paul for sharing your take. As usual, very insightful. Do you see an opportunity in other med space? Senior and nursing facilities? Outpatient medical offices? DOC, CTRE, OHI, SBHA?
You are welcome, St. The economics of senior nursing facilities is really bad, thanks to reimbursement regulations. I discuss the details in my coverage of SILA (https://focusedinvesting.substack.com/p/a-first-look-at-sila-realty-trust). This keeps me away from CTRE, OHI, and SBRA. The finances are different for inpatient rehab facilities, which is one attractive aspect of SILA.
Long-term, senior housing has been a value destroyer. With hindsight, it might have been smart to ride the supply crunch with VTR or WELL. But I don't buy companies I would not hold indefinitely, and those two don't qualify.
In the abstract I like medical offices, from a long-term macro perspective, and it would be good to take a look at DOC. But those markets have also seen some issues, and that would warrant a close look too. But I see little likelihood of concluding that DOC is a stellar opportunity.
Thanks Paul, seems like an unbiased update (tough to do when underwater...ha). For me, I wrote ATM calls on my position 3-4 weeks out during the falling knife stage. It has more than tripled the divi payment. It now looks like ARE has bottomed and is moving up so I'll need to be more cautious on keeping my shares from getting called away and the premiums will reduce as I'll need to go further OTM, but suspect I'll turn this into a 15-20% annual RoR while the shares recover over the next year or two (I think it is recovering as smart money is moving back in).
Thank you for the update! A friend who does brain research at a facility where management was also looking to use AI to replace more grant writers also said "they'll still need wet lab space."
It seems easier to lease industrial/warehouse buildings in bad locations whereas life science companies need to compete to hire and retain the best staff. Compared to ARE's SF Mission Bay campus, most of the new supply in the SF Bay Area is in South San Francisco and other areas farther from transit and where people prefer to live.
Thanks, Eric. Grant applications are serious business and need to be closely focused on what the sponsor wants. I never let a grad student write one for the group, and certainly would not let AI do any important parts.
And I agree that locations with good networking potential are indeed of high value. My daughter's doctoral research was largely in UCSF buildings near Mission Bay just as that was being built up. Nice area.
This was very helpful in giving a timeline for when oversupply should vanish (similar to how you gave us insight into the same situation in multi-family). Reduced EPR by 25% and used proceeds + cash on hand to re-establish full position in ARE. Improved dividend by 80bps with much higher upside potential. Thank you RPD for your insights.
Thank you Paul! Great analysis!
This is very helpful, so thank you. Especially debunking the office conversion narrative.
Thanks Paul for sharing your take. As usual, very insightful. Do you see an opportunity in other med space? Senior and nursing facilities? Outpatient medical offices? DOC, CTRE, OHI, SBHA?
You are welcome, St. The economics of senior nursing facilities is really bad, thanks to reimbursement regulations. I discuss the details in my coverage of SILA (https://focusedinvesting.substack.com/p/a-first-look-at-sila-realty-trust). This keeps me away from CTRE, OHI, and SBRA. The finances are different for inpatient rehab facilities, which is one attractive aspect of SILA.
Long-term, senior housing has been a value destroyer. With hindsight, it might have been smart to ride the supply crunch with VTR or WELL. But I don't buy companies I would not hold indefinitely, and those two don't qualify.
In the abstract I like medical offices, from a long-term macro perspective, and it would be good to take a look at DOC. But those markets have also seen some issues, and that would warrant a close look too. But I see little likelihood of concluding that DOC is a stellar opportunity.
Thanks Paul, seems like an unbiased update (tough to do when underwater...ha). For me, I wrote ATM calls on my position 3-4 weeks out during the falling knife stage. It has more than tripled the divi payment. It now looks like ARE has bottomed and is moving up so I'll need to be more cautious on keeping my shares from getting called away and the premiums will reduce as I'll need to go further OTM, but suspect I'll turn this into a 15-20% annual RoR while the shares recover over the next year or two (I think it is recovering as smart money is moving back in).
Thanks, Phil. Real objectivity is indeed a challenging goal. Nice tactics with the calls!
Thank you, Paul. Nicely written.
Thank you for the update! A friend who does brain research at a facility where management was also looking to use AI to replace more grant writers also said "they'll still need wet lab space."
It seems easier to lease industrial/warehouse buildings in bad locations whereas life science companies need to compete to hire and retain the best staff. Compared to ARE's SF Mission Bay campus, most of the new supply in the SF Bay Area is in South San Francisco and other areas farther from transit and where people prefer to live.
Thanks, Eric. Grant applications are serious business and need to be closely focused on what the sponsor wants. I never let a grad student write one for the group, and certainly would not let AI do any important parts.
And I agree that locations with good networking potential are indeed of high value. My daughter's doctoral research was largely in UCSF buildings near Mission Bay just as that was being built up. Nice area.
This was very helpful in giving a timeline for when oversupply should vanish (similar to how you gave us insight into the same situation in multi-family). Reduced EPR by 25% and used proceeds + cash on hand to re-establish full position in ARE. Improved dividend by 80bps with much higher upside potential. Thank you RPD for your insights.
You are welcome!