NEW YORK (TheStreet) -- It seems as if Nick Schorsch, executive chairman of American Realty Capital and the CEO of American Realty Capital Properties (ARCP - Get Report), has created the ultimate non-traded REIT mouse trap for creating full market liquidity. Over the course of just a few years, Schorsch and his team have reeled off six liquidity events consisting of public REIT listings, IPO's and portfolio sales. The latest event was on Monday, with the listing of American Realty Healthcare Capital Trust (HCT); it is having another listing next week on the NYSE, with the ticker NYRT.
American Realty Healthcare Capital Trust listed approximately 183 million share of common stock Monday morning on Nasdaq. The New York-based health care opened the first day of trading at $10.50 and the shares have stayed flat throughout the day.
HCT commenced raising money in August 2010 and over the course of the last three years the company has amassed a diversified portfolio of 141 properties -- over 7. 1 million square feet, in 27 states. While many of the newly listed non-traded REITs have been the "pure play" type (one asset class), HCT is unique in that the company has exposure in most all health care sectors including medical offices (51%), senior housing (30%) and hospital/post-acute care (19%).
HCT enters the public markets with some impressive portfolio statistics including a medical office portfolio that is 96% leased; a hospital portfolio that's 100% leased, and a senior housing portfolio that's 94% leased. The average-weighted remaining lease term for the portfolio is an impressive 10.7 years.Also, HCT begins trading with an impressive balance sheet consisting of just 11% secured debt and total debt of around 20%. The company has more than $350 million of remaining capacity on its credit facility so it should be competitive with other public REITs. The weighted-average interest rate for the debt is 4.2% with a weighted-average term of 3.3 years. In terms of dividend safety, HCT has guided funds from operations, or FFO, of 81 cents to 86 cents and adjusted funds from operations, or AFFO, of 73 cents to 78 cents. With a AFFO payout ratio of 90%, HCT will be paying out a generous dividend yield of 68 cents (no change to current dividend) that translates into a yield of around 6.6%. There's not much not to like about this new REIT. However, I'll point out that this REIT is externally managed and that could create some potential conflicts of interest. Also, HCT will have to make up some ground for the load (around 15%) that was used to originate the 2010-2013 investments. Another risk to point out is the diversification risk in that HCT is competing "heads on" with the Big 3 Health Care REITs - Ventas, Inc. (VTR), HCN (HCN), and Health Care REIT (HCN). All three of these REITs have underperformed (negative returns) over the last 90 days while the "pure play" REITs have done well. Of course, there's also the chance that one of the Big 3 REITs decide to take advantage of the consolidation and offer to buy out HCT -- that seems to be the trend. In closing, Schorsch may be launching another winner. Next week, it is New York REIT, a "pure play" New York City office REIT that the non-traded king (Schorsch) plans to list on the New York Stock Exchange. Oh well, that's just more cheese for the Nick Schorsch mousetrap... -- By Brad Thomas, contributor to TheStreet and editor of The Intelligent REIT Investor, a monthly REIT newsletter.
At the time of publication, Thomas was long ARCP, HTA, OHI, VTR and MPW, although positions may change at any time. Follow @swan_investor This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.