As previously documented on BRIIDGE, the pandemic-induced rise in disposable income fueled speculative investor behavior, causing short-term distortions in market prices across sectors. This phenomenon highlighted disparities between short- and long-duration assets and between cyclical and defensive sectors.

Performance dislocations were not confined to sectors alone but extended to industries within the same sector, driven by macroeconomic forces. For example, short-term factors such as the shift to remote and hybrid work-life arrangements created structural performance disparities between companies engaged in different stages of the residential and office investment life cycles.

Fig 1: Performance 1YR Horizon

BRIIDGE Shortcut: TS Reference Index

Fig 2: Sales Growth [1YR Rolling]

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA

The residential industry demonstrated resilience, strengthening balance sheets sufficiently to manage the transition from government stimulus and monetary easing to quantitative tightening measures.

In contrast, the office industry faced significant challenges, failing to recover on fundamental metrics or price dynamics. As a result, office assets consistently underperformed the market during both the short- and medium-term phases of the post-pandemic recovery.

Despite comparable top-line figures, a moderately lower debt profile, and higher margins over the past four years relative to the residential industry, the REIT-healthcare facilities industry underperformed both its benchmark and the residential industry on an equal-weight basis in the quarters following the pandemic.

This underperformance was attributed to a lack of perceived macroeconomic tailwinds and the stigma associated with healthcare facilities at the time. However, over the past three years, alignment in fundamentals between the healthcare and residential industries has translated into similar market performance, significantly outpacing the office industry.

Fig 3: Operating Margin [1YR Rolling]

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA

Fig 4: Free-Cash-Flow To Sales [1YR Rolling]

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA

The latter faced over several quarters persistent macroeconomic headwinds, including declining occupancy rates and rising debt-servicing expenses due to higher interest rates, resulting in a pronounced downtrend in bottom-line margins compared to its residential and healthcare counterparts.

Within the healthcare facilities industry, certain outliers—such as Welltower Inc. and Omega Healthcare Investors Inc. —have outperformed, driven by a diminishing debt burden and stronger margins. With the ongoing monetary easing cycle, an arbitrage opportunity may emerge at the industry level, offering potential for strategic investment.

Fig 5: Net Income Margin [1YR Rolling]

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA

Fig 6: Performance [1YR]

BRIIDGE Shortcut: TS Reference Index

Fig 7: Dividend Yield

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA

Fig 8: Net Debt To Ebitda [1YR Rolling]

BRIIDGE Shortcut: BRIIDGE FA | BRIIDGE CUSTOM FA