Senior Housing Operating Growth Strategies Lend Stability To Industry reits

Senior housing REITs have more stable credit lines thank to their strategies of building new senior housing operating platforms. 

That analysis is from Fitch Ratings, which compared CareTrust REIT (NYSE: CTRE), National Health Investors (NYSE: NHI), Sabra Healthcare REIT (NYSE: SBRA) and Omega Healthcare Investors (NYSE: OHI). The ratings agency scored the four REITs similarly across a number of factors, with each earning a “BBB-” credit rating.

CareTrust ranked below its peers for portfolio liquidity and ability to leverage assets due to having a heavier concentration of skilled nursing facilities in its portfolio. The report notes skilled nursing is “generally less liquid and harder to leverage than the more diversified portfolios held by other peers.”

“A key industry trend that we’ve observed is the reduction of skilled nursing facility (SNF) exposure. Recent divestitures by NHI and Omega Healthcare Investors reflect a broader move toward assets with lower regulatory risk and stronger long-term growth prospects,” Aniruddha Jadhav, associate director of North American Corporates, told Senior Housing News. “At the same time, managed senior housing operating portfolios are emerging as important growth drivers, with SBRA reporting strong same-store cash NOI growth.”

NHI was the sole recipient of a positive outlook factor due to pivoting and focusing on newer, private-pay senior housing and the divestiture of lower-acuity asset.

The U.K. is also becoming more of a growth engine for REITs, with properties in the country making up 18% and 17% of OHI’s and CTRE’s respective portfolios, the report states.

The use of RIDEA structures is becoming more prevalent among REITs as well. NHI and SBRA both report having lower margins than peers, but the structure allows each to “participate directly in property economics, providing superior organic growth potential despite lower EBITDA margins than [triple-net] peers.”

“Managed RIDEA portfolios are now a core growth driver rather than an experiment,” the report states.

Fitch is monitoring the impact of CareTrust’s recent senior housing growth and building out a senior housing operating portfolio back in December. Omega is “taking a ‘rifleshot’ approach by targeting underperforming assets below replacement cost and pairing them with proven managers to generate low- to mid-teen internal rates of return,” with operational slippage being the primary risk factor compared to triple-net leases, according to the report’s authors.

“The analysis underscores the importance of needs-driven care models, particularly assisted living and memory care. We believe REITs under our coverage universe are increasingly favoring operators with strong clinical expertise and proven operational capabilities,” Jadhav said. “As RIDEA structures become more common, operators must effectively manage labor and utility cost pressures while leveraging technology and AI to improve efficiency.”

Looking ahead, Jadhav added intense competition in major markets is opening up attractive investment opportunities in secondary markets and rewarding operators with strong regional expertise and disciplined execution.

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