Previous here at EEON, we’ve written about investment organizations called “Real Estate Investment Trusts” or REIT for short. As a reminder, REITs are organizations that invest in income-producing real estate for their shareholders across the spectrum of industries. Since real estate markets are highly geographically and industry specific, there are a large number of REITs that trade on public markets that allow investors to benefit from exposure to real estate assets. Currently, a REIT called Physician’s Realty Trust (DOC) is rated at #7 on EEON’s list of lowest risk assets.
Physician’s Realty Trust is an investment firm that focuses on acquiring, developing, owning, and managing healthcare properties. Healthcare real estate is a highly specialized niche in the broader real estate market, due to the fact that the physical locations in which healthcare is provided have unique needs. For example, a hospital needs facilities that are suitable for performing surgery, laboratory testing, medical imaging, and laundry all under the same roof. Coupled with regulatory burdens, building new healthcare space is an expensive and painstaking businesses. Physician’s Realty Trust provides leases to hospitals, independent physicians, and healthcare delivery systems that require suitable healthcare space but are unable or unwilling to invest in a physical location independently. The company primarily leases medical office buildings, acute and post-acute care hospitals, and outpatient treatment centers.
Physician’s Realty Trust was founded in Milwaukee, Wisconsin in 2013 and maintains a small team of only 77 employees. However, the organization holds investments in 260 properties in 31 states across the U.S. Physician’s Realty Trust generated $429.5 million in revenues from these properties in 2019. The company’s recent quarterly filing shows that the majority of this income was generated from medical office space leases with the remainder coming from leases on clinical space. On a year-over-year basis, PRT’s revenues have increased 14.6%, and the company’s management team has expressed its belief that it will be able to weather the worst of the COVID crisis and continue to grow alongside healthcare demand.
Although the five-year chart shown above doesn’t obviously paint Physician’s Realty Trust as a fast-growing, high flying growth equity opportunity, the organization is attractive for several reasons. First, healthcare is a large and stable industry in the United States, and as the number of baby boomers of retirement age and the average U.S. lifespan continues to rise, so will the demand for the types of health services that rent space from Physician’s Realty Trust. Second, at the time of writing, shares came with a dividend yield of 4.97% which, in an era dominated by global central banks holding interest rates at or below zero, provides investors with an opportunity to earn regular income from parked cash. This combination of income generation, growth potential, and the organizations Beta (a measure of covariance with the market) of 1.0 make Physician’s Realty Trust an interesting asset for investors who are spooked by tech-driven valuations in the broader market.