An interview with Rich Anderson, Managing Director/Senior REIT Analyst, SMBC Nikko Securities America

An interview with Rich Anderson, Managing Director / Senior REIT Analyst, SMBC Nikko Securities America

An interview with Rich Anderson. In this interview, Andrew Dick interviews Rich Anderson, a Senior REIT Analyst with SMBC Nikko Securities America. Andrew sits down with Rich to discuss health care REITs.

To view relevant and current price charts and the history of changes in SMBC Nikko Securities America investment rating(s) and/ or target price(s), click here

Podcast Participants

Andrew Dick

Attorney, Hall Render.

Rich Anderson

Senior REIT Analyst, SMBC Nikko Securities America

Andrew Dick: Hello and welcome to the Healthcare Real Estate Advisor podcast. I’m Andrew Dick, an attorney with Hall Render, the largest healthcare focus law firm in the country. Today we will be speaking with Rich Anderson, a managing director and senior REIT analyst with SMBC Nikko securities. Rich has been covering equity REITs for many years and is a well known name in the business. Over the years, he’s focused on a number of different REIT sectors including healthcare REITs. A number of our listeners are REIT investors who work in the healthcare REIT industry and I thought it’d be interesting to get Rich’s perspective on equity REITs in general, along with healthcare REITs. Rich, thanks for joining me today.

Rich Anderson: Thanks for having me Andrew.

Andrew Dick: Rich before we talk about your role at SMBC, let’s talk about your background. Tell us where you’re from, where you went to school and what you aspire to be.

Rich Anderson: Okay, I’m from the great state of New Jersey so Jersey boy through and through. Bruce Springsteen fan perhaps. Went to school at the University of Maryland. Not perhaps by the way. Definitely Bruce Springsteen fan. Went to school at the University of Maryland and studied aerospace engineering. Not quite a real estate background, at least from an education perspective, but happy to report to you that standing before you is a rocket scientist. As I always say, you’re welcome.

Rich Anderson: Then for about six years or so, I worked as an aerospace engineer for a government contractor, also in New Jersey, by the way. In South Jersey supporting the FAA Technical Center. Did that for, as I said, six years. In the meantime, was getting my MBA at night at a small school in Jersey called Monmouth University in finance and made the trip to Wall Street. It all makes sense at that point. This is the mid 90s and I worked for an aerospace defense analyst. I figured I had the business degree and the practical experience in aerospace engineering that this would be my career.

Rich Anderson: But at some point early on, I took note of the REIT industry which the REIT model has been around since the early 60s, but as a trading industry really didn’t get started in what we call the modern day era of the REITS until the late 80s, early 90s. The real estate team was physically sitting next to us. I inquired about a job opening and lo and behold, I moved over there in 1996 and started my career covering the REITS and have been doing it ever since. 25 years in now, straight on through as a REIT analyst and here I am with you today as a result of all that.

Andrew Dick: Great. Well Rich, talk about the sectors you’ve covered and what you’re actually covering today?

Rich Anderson: Sure. Over my career, I’ve pretty much covered every asset class that make up the US REIT industry, maybe about 150 different REITS. There are all sorts of walks of life in real estate as you know and all of them behave differently from one another. The fact that I’m a REIT analyst is one thing, but I truly believe we cover many different industries because malls bear very little resemblance to data centers, of course, and so on. My history is quite a wide net in terms of the properties that I’ve covered.

Rich Anderson: Today I cover as you mentioned, the healthcare REIT space, but I also cover the industrial REITS which are known for the Amazon exposure and the logistics of E-commerce and all that that’s going on. The office industry, which is interesting today because of all the work from home and whether or not that’s going to have an impact on things. The multifamily industry, which should benefit from work from home, I guess, if you think of it that way. But I’ve been covering the multifamily sector for quite a long time.

Rich Anderson: Most recently picked up coverage of a relatively new REIT asset class and that’s the gaming sector. There’s three REITS that make up that space that obviously own casinos around the country. Then finally, there’s the one and only Ground lease REIT Safehold. I am one of a few analysts that cover that one. I find it very interesting. It’s, as I said, no other company really does ground lease investing, specifically as Safehold does. It’s been a very interesting story out of the gate coming public in 2017 and really having a breakout year last year as they market their product to the real estate community.

Andrew Dick: Yep, and as we talked about before, SAFE is a very interesting REIT. We monitor it primarily because a number of our hospital clients frequently use ground lease structures when they lease part of their campuses to medical office building owners and investors so yep, very interesting model. Rich, for our listeners that aren’t familiar with what a REIT analysts does and the type of information that they publish, talk about the ratings process, how that works and the different designations. So buy, sell, hold. You said that your company has its own terminology.

Rich Anderson: Right, our terminology, the equivalent of buy, sell, hold would be outperform, underperform and neutral. It’s just a different word same logic. As an analyst, my job is to be as smart as I possibly can about the commercial real estate industry in all its walks of life. What I love about being a REITs analyst is there’s no script. Whatever it takes for you to be smart about the industry you are willing, within reason or you’re allowed to do.

Rich Anderson: That means property tours, that means staying in touch with what’s going on around the country. Whether it’s specific to real estate or the forces that create value in real estate. I always feel like I’m a generalist when I think of the Midwest and manufacturing and technology in the Bay Area and financial services in New York and Boston. These are all the forces of nature that create value in the bottom line bricks and mortar execution of the REIT industry.

Rich Anderson: Staying smart on the space and then drilling down into individual property sectors and then to individual companies. When I’m producing my ratings that I try to keep as balanced as possible, and always testing myself whether a rating change is warranted or what have you, I’m comparing against the S&P 500 because we do have general investors that invest in REITs so that would be perhaps their benchmark. Then I’m comparing an individual REIT against the REIT industry.

Rich Anderson: So just that specific element of the comparison because of the REIT dedicated investor community, really it has to be in that space. There’s a more finer line in terms of thinking about ratings. Then within individual property sectors, what do I think of the management teams relative to their most comparable peers? What do I think about balance sheets? What I think about geographies and for whatever reason, what’s going on around the country how is that affecting this real estate portfolio, whether it’s in the urban core, whether it’s in the suburbs or rural areas? How is, as I mentioned, work from home as an example, how is that going to affect office? How is E-commerce going to affect Industrial? How is COVID-19 going to affect the healthcare industry long term?

Rich Anderson: There’s many, many ways to peel back the onion here. It quite frankly makes my job very interesting because there’s nothing very mechanical about it. You can be very creative in the process and I think you get rewarded for that creativity by applying whatever it is that you think is necessary to be smart and to think about your constituents and who’s reading your research and what matters to them. I try to lump that all together and appeal to the masses as much as I can. Understanding that everybody has a different role from one another that is talking to me or reading my research reports.

Andrew Dick: Rich, two follow up questions. How do you decide which companies and sectors to cover and then who is using your information that you publish?

Rich Anderson: Right. The sectors and the companies that I cover is my decision and where I think I can create value to my end users of my research. Exactly how I come up with those decisions perhaps requires another podcast, but suffice to say I am thinking about where can I make the biggest difference? Where do I have maybe the brightest ideas that I could share that I think are differentiated from my competition that does the same thing that I do? For example, I don’t cover the malls right now. The mall business has been tough. I don’t know exactly how I would create incremental value there where I think I can create value. I know we’re going to talk about health care in that space or multifamily where I’ve been covering it for a very, very long time.

Rich Anderson: That’s the thought process. Kind of a vague answer but the answer nonetheless. My end user is the portfolio managers and anybody for that matter that invests in REITs. That could be the Fidelity’s and Wellington’s of the world. That could be pension funds. That could be insurance companies. That could be endowments. Anybody who is investing money, might ask to read my research and hopefully compensate us for that. That’s how it works. Of course, the companies that I cover are interested in what I’m having to say about them. But that’s the other side of the house.

Rich Anderson: That’s the investment banking side of the house and I have to have as… For legal reasons have to have my blinders on about conflicts of interest and all those things. I really have to be thinking about my end user. If I have a sell rating on a stock and my firm has a relationship with them on the other side of the house I can absolutely not pay any attention to that and of course I don’t. It’s a very important line in the sand that I must never cross. The so called Chinese wall.

Andrew Dick: Very interesting. So Rich, let’s move into the healthcare REIT space. Talk about the different… What I call sub sectors. Healthcare REITs have been around for a long time. There are a number of different REITs that fall under the health care REIT category. How do you break down this sector?

Rich Anderson: The interesting thing about the healthcare REIT space is it is a collection of different asset classes. Whereas most property sectors, at least the way the US REITs are structured are focused in our asset class. You don’t have a whole lot of diversity in the multifamily sector, the office sector or the industrial sector. That’s their corner of the sandbox and they play it well. In the healthcare REIT space, you don’t have that advantage because there’s different types of healthcare real estate.

Rich Anderson: There’s life science, there’s medical office, there’s senior housing, which itself can be broken down between assisted living and senior and independent living. There’s skilled nursing and of course, there’s hospitals, rehab facilities and so on. There’s many, many derivatives of healthcare real estate. What I described earlier about how I go about thinking about asset classes, I do that in a microcosm sort of way when I cover the healthcare REIT space.

Rich Anderson: If I were to pecking order the different asset types within healthcare real estate, I would start with life science. Life science is obviously a solution to the COVID-19 problem. All the tendency of those assets are working around the clock to try to find therapies and work on testing and of course, God willing, a vaccine. There is some great public relations potential there. We all want to see an end to this but there’s also a lot of activity going on within the four walls of a life science facility.

Rich Anderson: That asset class one, one of the larger names in that business, of course is Alexandra real estate which is primarily a pure play life science REIT has outperformed in 2020 substantially. Because of so much activity going on, unlike for example, the malls where people were told to leave and can’t… By the way, can’t go to a mall or can’t go to whatever facility where there’s a lot of crowd gathering. The 180 degree opposite conversation is happening in life science facilities.

Rich Anderson: I would put them as a solution. Then you have medical office which is not quite so much of the solution to the story but is working alongside hospitals and opening up beds to care for people so there’s a lot of activity still in medical office. You are seeing elective surgeries being stopped in this environment. A little bit of a hiccup in terms of the operating business of a medical office facility but nonetheless, still a part of the solution in that sector which has quite a bit of cash flow visibility relative to other property types. Has also outperformed so far in 2020. Both of these have been our calls, by the way, going in speaking about how we think broadly about covering the real estate space.

Rich Anderson: Then the next level is skilled nursing. Skilled nursing obviously a lot of terrible things happening in some assets. Very vulnerable, older folks catching the virus and unfortunately passing away in some cases. You would think as an asset class, would you want to invest in that in this environment? The answer for me is maybe yes. The reason I say that is because skilled nursing like hospitals has access to the various government stimulus programs. They are able to fund themselves and support their themselves financially which in turn is a good thing if you’re the landlord, A.K.A the REIT collecting rent from these operators.

Rich Anderson: In a perverse way, I guess, as a capitalist, this asset class skilled nursing, actually works okay in this environment. Certainly not great for all the reasons we could talk about for quite a long time, but at least you’ll able to meet the rent obligations. Then finally senior housing which will be a great asset class over the long term for maybe reasons we’ll discuss later in this conversation. But for the time being, they too take care of old folks but they don’t have access access to the stimulus programs. It’s mostly a private pay option.

Rich Anderson: So occupancies have been ticking down quite substantially. With that, their ability to pay rent or keep their operations above water in this environment. They do not have the benefit of the stimulus programs that skilled nursing does. In the present tense, I’m somewhat worried about senior housing. Longer term, with demand coming as the aging of the population manifests itself in that business over the next 15 or 20 years. Could be a fantastic opportunity, but for the year now it’s a little bit tougher. A lot tougher.

Andrew Dick: Rich, that was a great overview. I have two follow ups. In terms of other categories, you talked a little bit about hospitals, when we think of REITs that play in that space, there are a number but there’s one that’s really… What I consider more of a pure play hospital REIT. That’s medical properties trust. How are they doing?

Rich Anderson: First of all I want to say they… I don’t cover medical MPW so I want to be a little bit careful about talking too much about MPW. Maybe I could speak generally. I think that perhaps the same rules apply in hospitals as they do in skilled nursing. With the one exception being we are probably over hospitaled, if that’s a word. Over hospitaled in the United States. Perhaps something that might come out of this is a retrenchment of the hospital industry longer term.

Rich Anderson: I am a little worried about that in the sense that you could have some consolidation. You could have some low market share, rural hospitals closing and redirecting patients to another hospital in the area that has better market share, better systems and so on. I guess I’m just a little worried longer term about the hospital more so than I am of the skilled nursing space. The hospital industry is dealing with COVID-19 which is not really a profit center.

Rich Anderson: You might come out of this a little bit weaker in the hospital space than what I might suggest with the skilled nursing space. But nonetheless, for the time being, it is being supported as I suggested with skilled nursing. One other thing I would say, importantly, we have long thought of government regulation for hospitals and skilled nursing is to be a “liability” for those two asset classes, because you have a tough time predicting what Medicare is going to do every year, what the 50 states in terms of Medicaid are going to sign.

Rich Anderson: We’ve had some surprises to the downside in the past that has derailed that business because it so much relies on government reimbursement to run. But now, you would think that the government, state and federal government are unlikely to do anything that is perceived to be taking money away from that industry. The counter to my comment about hospitals long term is the government is probably an asset now, because it is unlikely to take money away from these heroes that have been on the front line doing all this for all of the people that are suffering from this disease. A lot of things to think about. Hospitals and in the healthcare real estate space in general. It’s going to be interesting on the other side of this for sure.

Andrew Dick: Let me bounce around a little bit in some of the different sectors. One, I don’t know that it’s really a sector but at least the way I think of a couple of the big healthcare REITs Ventas, Welltower, Healthpeak. I think of those as the three.

Rich Anderson: Sure.

Andrew Dick: I think of them as diversified healthcare REITs. What are your thoughts about those big players in the industry? We’ve seen some dividend cuts. Some of them have exposure to senior housing, what are your thoughts on how they’re performing today?

Rich Anderson: All three are fantastic organizations. The very fact that they’ve been consolidators and grown to the size that they have become is evidence of the quality of these organizations. Now they have certainly had their difficulties and some headwinds as of late because as you mentioned, they have exposure to senior housing, but taking that matter even a step further, they have exposure to operating senior housing. Very often we talk about triple net leases. In the triple net structure, the operator simply paying a rent to the REIT and it’s very much a passive investment from the REITs perspective.

Rich Anderson: In 2007, laws were passed to allow for the ownership and operations of healthcare real estate, namely senior housing facilities. That was a sea change in terms of how the REITs acted and played in the senior housing space. Now, fast forward to today, Welltower about 45% of its total portfolio is operating senior housing facilities. Not triple net, but literally the operations on their balance sheet. Ventas, about 35% of their portfolio is senior housing operating facility.

Rich Anderson: They’ve taken that law and run with it. They’ve done it because there has been growth over the years. It’s come back to bite them in this environment because they now are feeling the hit directly from occupancy laws in that space. Healthpeak is the third of the big three as you describe them which is what we all describe them as. They have performed relatively better than Ventas and Welltower. I think that’s because their exposure to senior housing operating is significantly lower.

Rich Anderson: They play in senior housing, but they have a fair amount of triple net. They do have senior housing operating less than 20% of the portfolio but they play big in life science. They’re another life science player. They’re benefiting from that and they’re big in medical office. So too is Ventas and Welltower. The lion’s share of the peak story is life science and medical office and that’s why they’ve been a better performer. To that end, my my ratings on those three are outperform for peak and neutral for Welltower and Ventas.

Andrew Dick: Yeah, it’s interesting. I think of those three the same way and I assume the law-

Rich Anderson: That’s right.

Andrew Dick: What we call in the industry the idea type structure where the REITs can be involved in management operation.

Rich Anderson: To be clear not the management. The physical management of the assets has to be run by a third party. What happens is REIT owns all the business but part of their cost structure is to pay a management fee to somebody who’s physically bathing and feeding people because that wouldn’t be considered a real estate activity. They still separate a little bit, there actually structured a lot like hotels where they pay a fee to a flag like a Marriott or Hilton or so on. That’s how the healthcare remodel a set up when they do do a REIT data structure.

Andrew Dick: So they’re getting a piece of the operating income through that structure. The other point you made, which I thought was a good one was about peak. The fact that it has more life sciences assets compared to the other two. It seems to be really working on a number of new development projects in the life sciences space as well which I find exciting. For a while I think it went through a rebranding and now it seems to be really coming into its own and doing well. I tend to agree with you. I like [crosstalk 00:24:28].

Rich Anderson: That’s an interesting company. The management team there has come together over the past five years led by Tom Herzog who I know very well and for a long time. He actually cut his teeth in the REIT space in the multifamily sector but he’s a very smart guy and he’s built a team of very smart people around him. In doing that, restructuring a legacy company into what it is today they’ve really done a fantastic job there.

Andrew Dick: Going back to MOB’s and some of the pure play MOB REITs, I think you cover HTA-

Rich Anderson: That’s right, yeah.

Andrew Dick:  Healthcare Trust of America and then healthcare REIT trust. Is that right, rich? I really like… Both those companies seem to be doing well. Is there any concern that there’s been so much demand for assets that it’s becoming harder to find good product at a good price to make a good return for those players?

Rich Anderson: Yeah it’s always a problem. Particularly in normal times, in low interest rate environment you do have a lot of interest in asset classes and particularly medical office that appeals to a wide spectrum of investors because as I mentioned earlier, it’s such a visible cash flow stream. It’s almost like an annuity and appeals very well to private equity and a lot of different types of potential investors outside of the REIT space. So yes, competition for that asset class has been fierce over the years.

Rich Anderson: We haven’t seen any disruption in terms of cap REITs on medical office facilities, even in this period of time. Now, we’re not seeing a lot of transaction activity but where we have seen it, there hasn’t been a whole lot of disruption in terms of property value. That’s always a good thing if you’re long on the sector which both of those companies are, but if you want to grow it, it becomes challenging. That’s always the difficulty. Now, healthcare REIT and also HTA both have a fair amount of development.

Rich Anderson: The way you get a better return is by taking on the incremental risk of development and you get 150 or 200 basis points return spread over what you’d be able to do as an acquisition. That’s one way to approach growing the portfolio, by going the development route. Of course development comes with its own risks. That’s always a trade off. That’s one way that the two of those companies are managing that issue specifically.

Andrew Dick: Great. One question about life sciences, Alexandria in particular I know recently had a share offering. Raised something like a billion dollars, I believe, which was huge. Then I think Blackstone may have raised a couple billion dollars from one of its life sciences funds. How does a publicly traded REIT like Alexandria… I mean, there’s so much interest in life sciences now and I know they have deep roots in the industry. How do they compete with some of the private equity players in that space?

Rich Anderson: That might be better question for them because I’m sure it’s a doggy dog world out there when it comes to a question like that. Alexandria cost of capital is quite attractive and fantastic balance sheet. I think there’s more than enough to go around. Of course, the best cost to capital perhaps in the planet is Blackstone. It’s a double edged sword when they come into the space. They took BioMed private a few years back and have been managing that portfolio ever since.

Rich Anderson: You’d like to have the stamp of approval of a Blackstone in your space but then you have a pretty sizable competitor as well. I think what Alexandria comes to the table with is reputation. Their portfolio is spectacular in many respects. It comes from mostly their development business and so if you see an Alexandria asset, you almost recognize it before you see the name on the door because they just do such a good job. That reputation precedes them.

Rich Anderson: They have relationships up and down the board throughout the bio pharma industry, they themselves can be characterized as a life science company in many respects. They are not real estate people only. If you meet the management team, you will find scientists and PhDs that are very knowledgeable and interface specifically with their tenants. That’s the differential for Alexandria. They are not just a money machine, they are actually very intellectual when it comes to the underlying business. they host forums with all their tenants.

Rich Anderson: They even have a VC arm where they’re investing into early stage development companies. They run the gamut in the life science business and I think that’s a separating characteristic for Alexandria when it comes to competition.

Andrew Dick: Great. Switching quickly to senior housing, you mentioned earlier, you think the sector will recover over time and may be an attractive investment. A couple of the long term care REITs playing in that space, which ones do you like [crosstalk 00:30:19].

Rich Anderson: Well so I have an outperform rating on SABRA, S-A-B-R-A. That’s about 60% skilled nursing 40% senior housing right now. I’m getting my fix I guess I will say, through SABRA. I get senior housing exposure with Peak even though it’s smaller than the others. I’m still getting it that way. The day may come. Obviously I can’t say when or how that I’ll flip more of aggressive approach into senior housing. Part of the reason for that is fairly simple.

Rich Anderson: If you look at a birth chart in the United States, in 1935 births troughed Right in the midst of the Great Depression. That’s 85 years ago. That’s about the time people go into senior housing facility differently. We are actually at a dearth of demand for senior housing at this very moment in time because of what happened 85 years ago. But then if you also look at that birth chart, from that point forward to call it 1950, or 1955, birth rates hockey sticked up. I guess people got happy. The Great Depression was over with.

Rich Anderson: This doesn’t take a whole lot of analysis to know that over the next 15 to 20 years, you were going to have people entering those years where they start to consider senior housing facilities. Which has a voluntary element to it, particularly in the independent living side where you want to have a little bit more ease of life but you don’t necessarily need a whole lot of care in terms of being fed or all that kind of stuff. Assisted living has more care element to it of course and then memory care unfortunately can play a role in assisted living facility as well.

Rich Anderson: But nonetheless, that demand profile is coming. That question is is it going to be like watching paint dry or is there going to be a real resurgence of activity? That is why I said senior housing probably comes much more interesting in the aftermath of all this because we can plainly see the demand coming.

Andrew Dick: Rich, do you have any concern that some of the independent living facilities, some of those in many states don’t have to be licensed. They’re private pay as you mentioned earlier, which is attractive to many investors but it may be a little easier for competitors to enter the market for those reasons. Any concerns about when you compare that to a hospital or a skilled nursing facility, often those have to have a license, maybe a certificate of need in certain states which are barriers to entry. Is it a double edged sword because you have the private pay which is a good [crosstalk 00:33:13].

Rich Anderson: Well, it has been a problem [inaudible 00:33:16]. Perhaps a silver lining if there could ever be one in this environment is supply getting shut down in the senior housing space, but you’re right. There aren’t barriers to entry. We were worried about… Just to back up for a couple seconds, we were worried about supply in the multifamily industry when it was running at about 2% of existing stock in senior housing and specifically assisted living. It was running five or 6% of the existing stock. That’s real competition from supply.

Rich Anderson: I mentioned earlier a dearth of demand in the present tense was happening at peak levels of supply. Senior housing was really getting it from a couple of different angles. I think, again, the demand comes back but perhaps supply shuts down at least for a period of time. The REITs that traffic in that space will have a little bit of a breather from a competition standpoint. But all bets are off longer term because developers see what we just talked about in terms of demand.

Rich Anderson: You have to be able to balance that and know how supply will work itself into the conversation longer term. Your point is spot on. You don’t have the regulatory environment that skilled nursing has from a supply perspective and hence you’re exposed to supply should that start to turn on again.

Andrew Dick: Rich let’s switch gears. Let’s talk about the healthcare real estate industry in general. It seems like I’ve noticed Nareit put out some reports over the past few weeks on rent collections, generally for the healthcare REIT sector. Rent collections have been pretty strong compared to other property sectors. It seems like the healthcare REITs are performing reasonably well given what’s going on in the world. What are your thoughts [crosstalk 00:35:20]?

Rich Anderson: It depends on the asset class, of course I mentioned the stimulus that’s helping in the skilled nursing space. I think the operators want to stay current in the face of declining occupancy. There is a vested interest to maintain one’s credit and all of that. But there’s also the realistic side of this. If they simply don’t have the money, particularly in the case of a triple net execution, the fortunes of the operator accrue to the REIT. The REIT has to be careful about bullying too much because you can be aggressive and demand rent payments at their current level.

Rich Anderson: If that disrupts the credit of the operator, the REITs, at least in a triple net structure are going to be judged by that. They become a proxy of the health of that operator. You might see rent deferrals depending on how long this situation last. You might see actual rent cuts perhaps in exchange for a lease extension. From a REIT perspective, you don’t want to just blindly cut rents if you can avoid it, you might want something in return for offering that assistance.

Rich Anderson: We’re seeing things like extension of leases or other, what I would call assets as a compromise in that negotiation. But you’re right. To this point, the numbers have born out to be okay. Even though we’ve seen occupancy drifting down so much. There have been two significant… Actually three significant dividend cuts in the healthcare REIT space namely Welltower, Ventas and Sabra have all cut their dividend in this environment perhaps in anticipation of seeing rent come down to some degree.

Andrew Dick: Any predictions from management on whether they’ll increase the dividends once things start to get better?

Rich Anderson: Well I think that will always be the attempt. The REITs have been generally great when it comes to dividend policy and managing their capital and doing it wisely. Generally seeing dividends step up across the REIT industry generally and I think we’ll see more of that. In this time, this is something none of us have lived through perhaps ever. I don’t know how many of your listeners were around in 1918, but maybe.

Rich Anderson: Nonetheless, this is uncharted territories and I think you have to do the right thing and sometimes the right thing is to reset dividends and put yourself in a position to succeed in the future. An interesting quote, and again, not to make light of this, but Rahm Emanuel once said, “Never waste a good crisis.” That is not to be funny at all. What it does mean is maybe this is a time to look at yourself in the mirror as a REIT and fix things that were perhaps a little broken in front of this so that you do emerge from this healthier, and you do have the opportunity as you suggested to grow the dividend and get back to some level of normalcy. This could be a time to reset, rents and reset balance sheets and do things necessary to be a healthier entity longer term.

Andrew Dick: Rich, switching gears what advice would you give for someone looking to get into the real estate or the REIT business? You’ve been doing this for many years? What should folks be reading, who should they be talking to or trade organizations? What advice would you give to someone?

Rich Anderson: If that doesn’t do it for him which should be unbelievably surprising. Just kidding of course. The NARI, The National Association of Real Estate Investment Trust. They have a fantastic website,, and you could get a lot of information about the REIT industry there. REIT 101 type of information about all the language. It can send you in a tailspin a little bit. We don’t talk about EPS in the read industry, we talk about funds from operation or FFL.

Rich Anderson: You have different tax consequences. You don’t pay corporate tax if you pay enough in the way of dividends. There’s a lot to understand about what a REIT is relative to other industries and other C corpse. I think that’s a good starting point. You can really get a lot of knowledge out of NARI REIT. They’re there in part to teach the world about the real estate industry.

Andrew Dick: Rich, where can our listeners learn more about you and your research?

Rich Anderson: I work for SMBC, a very large bank based in Tokyo. Its stands for Sumitomo Mitsui Banking Corporation. Our broker dealer is the Nikko Brand. So SMBC Nikko is my company. I’ve worked for various shops along the way, starting way back PaineWebber, then Citigroup and Bank of Montreal, VISA [inaudible 00:41:06] before this, another Japanese bank and now at SMBC. I imagine I’m an easy find out there on the internet. I’m probably not going to give out my cell phone right now but certainly anyone’s more than willing… I should say I’m happy to field questions and talk to people about the space to the extent there’s time. I’m happy to be an advocate for an industry that’s been my career for the past 25 years.

Andrew Dick: Well Rich, thanks for being on the podcast. I enjoyed the discussion very much. Thanks to our audience as well for listening on your Apple or Android devices. Please subscribe to the podcast and leave feedback for us. We publish a newsletter called The Healthcare Real Estate Advisor. To be added to the list please email me at

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