Daily Gains Letter

U.S. Retirement REIT Looks North for Extended Baby Boomer Play

By for Daily Gains Letter |

U.S. RetirementIn 2011, the first mass of baby boomers started to retire in the United States to the tune of 10,000 per day, which will continue for the next 17 years. Making up more than one-quarter of the population, the baby boomer generation controls the largest portion of the country’s disposable income. This has opened the door to a lot of opportunities for investors looking to capitalize on the retiring baby boomer generation.

Not surprisingly, Canada is also home to its own wave of retiring baby boomers. Interestingly, the Canadian baby boomer generation began one year later (1947) and lasted two years longer (1966) than the baby boom in the U.S. (Source: Kidd, K., “Canada’s baby boom different from U.S.,” Toronto Star web site, March 9, 2013, last accessed May 10, 2013.)

For some investors, that translates into additional opportunities for growth.

In Canada, baby boomers make up 30% of the population, with seniors making up the fastest-growing segment of the Canadian population, a trend that is expected to continue for the next few decades. In 2011, an estimated five million Canadians were 65 years of age or older, a number that is expected to double through 2036. By 2051, about one in four Canadians is expected to be 65 or over. As Canadian baby boomers retire, they’re going to need somewhere to live. (Source: “Canadians in Context – Aging Population,” Human Resources and Skills Development Canada web site, last accessed May 10, 2013.)

Those lucrative factors have not gone unnoticed on Wall Street.

Health Care REIT, Inc. (NYSE/HCN) announced recently that it agreed to buy a 75% stake in Revera Inc. for about $1.0 billion in cash and assumed debt. The acquisition includes 47 senior housing communities, with approximately 5,000 units located in major Canadian metropolitan markets, including Toronto, Ottawa, Vancouver, Calgary, Saskatoon, and Winnipeg. The transaction is expected to close in the second quarter of 2013. (Source: “Health Care REIT, Inc. Announces Agreement for $1.35 Billion Investment with Revera Inc.,” Health Care REIT, Inc. web site, May 8, 2013.)

With this acquisition, Health Care REIT now owns more than 13,000 units of private-pay senior housing in Canada. Revera, Canada’s second-largest operator of senior housing and long-term care facilities, will continue to manage the properties.

Going forward, Health Care REIT will be Revera’s strategic partner and will have rights of first opportunity on certain acquisitions and new development projects within defined geographic regions in Canada.

Health Care REIT’s $20.0-billion portfolio includes senior living communities, medical office buildings, inpatient and outpatient medical centers, and life science facilities.

Health Care REIT has an enterprise value of $27.0 billion and, thanks to its strong financial position and prudent management, has paid out 168 consecutive dividends.

The company is currently trading up 22.5% year-to-date and 39.1% year-over-year, and provides an annual dividend of 4.1%.

Thanks to Health Care REIT, investors can tap into Canada’s longer-lasting baby boomer generation. For investors looking to bolster their own retirement fund, this creates new revenue streams and a large number of interesting investment opportunities.

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