NEW YORK -(Dow Jones)- A decision by General Electric Co.'s (NYSE:GE) (GE) GE Healthcare Financial Services group to acquire 186 nursing-home facilities from Formation Capital could trigger a rally among health-care real estate investment trusts, especially those that invest in nursing homes, such as Omega Healthcare Investors Inc. (NYSE:OHI) (OHI), Ventas (NYSE:VTR) (VTR) and National Health Investors (NYSE:NHI) (NHI).
The $1.4 billion transaction marks GE Healthcare's first major equity investment in the skilled-nursing-home sector. Stifel Nicolaus analyst Jerry Doctrow said the deal provides "a strong endorsement" of the group, and makes GE Healthcare a potential acquiror of health-care REITs.
Also, the pricetag - at $66,000 a bed - supports a higher valuation for nursing home portfolios than the Street had previously given, Doctrow said. He raised his net asset value for Omega, which sports a similar portfolio to the one GE Healthcare purchased, to $16.50 from $15.
"We believe GE's major investment in the skilled-nursing space and the price it paid is a very positive sign for Omega's valuation," said Doctrow, in a note.
The GE transaction could also potentially boost the valuation of other health- care REITs, such as National Health Investors (NYSE:NHI) , where about 75% of its portfolio is focused on nursing homes.
Doctrow sees the transaction putting some health-care REITs "into play as potential acquisitions targets" by GE.
John Cobb, senior managing director for GE Healthcare's real estate finance team, indicated he expects the company to make further investments in the long- term-care market in the future, and will seek out acquisitions in other health- care property types, such as medical office buildings.
Omega's shares recently traded at $12.60, up 54 cents, or 4.5%, on volume of 206,400 shares compared with average daily volume of 269,184. Ventas (NYSE:VTR) , National Health Investors (NYSE:NHI) , Healthcare Realty Trust (NYSE:HR) (HR) and Health Care Property Investors (NYSE:HCP) (HCP), were all up about 1%.
-By Janet Morrissey; Dow Jones Newswires; 201-938-2118
(END) Dow Jones Newswires 06-28-06 1129 Copyright (c) 2006 Dow Jones & Company, Inc.
