While more healthcare real estate investment trusts move toward acquiring properties in other industries for their growth, Capstone Capital Corp. is holding its course.
With Meditrust Cos. adding motels and golf courses and VenTrust talking about going outside the healthcare industry for real estate soon after it's formed, Capstone's decision to stick with healthcare seems novel.
"We have not stopped to look at other things," says John McRoberts, president and chief executive officer at Birmingham, Ala.-based Capstone.
The REIT earlier this month got a boost from Wall Street when the company raised $122 million in a stock offering of 5 million shares.
With $540 million in market capitalization, Capstone owns, leases and provides mortgage financing for 171 healthcare-related properties. Its portfolio includes outpatient, medical office, assisted-living and other post-acute properties.
Its major tenants include HealthSouth Corp. (19% of its portfolio); Columbia/HCA Healthcare Corp. (11%); MedPartners (11%); and Tenet Healthcare Corp. (3%).
With Richard Scrushy -- chairman and CEO of HealthSouth and interim chief executive of MedPartners -- also serving as Capstone's chairman, the REIT is unlikely to lose lease revenues from those businesses.
But while Capstone focuses on the outpatient and long-term-care sectors, it wants to increase the number of tenants.
"We've put together a financing that is needed in the healthcare industry as the platform shifts from acute care to outpatient," McRoberts says.
As Capstone grows, executives don't want more than 10% of the REIT's portfolio tied to any one business in the long term. In its four-year history, Capstone has pared HealthSouth's holdings to 19% of its portfolio today from 44%.
"They have been among the fastest growing among the healthcare REITs," says Jerry Doctrow, an analyst with Baltimore-based Legg Mason Wood Walker.
Wall Street views Capstone's strategy as a good move because of the risks involved in having a portfolio tied to a few companies.
"Capstone's growth has focused on a relatively small number of for-profit providers," according to a report by Legg Mason Wood Walker. "Should one of these providers elect not to use Capstone for property in the future, it could adversely affect the company's growth prospects."
Capstone was formed in 1993 through a partnership involving McRoberts, Scrushy and Michael Martin, HealthSouth's executive vice president, chief financial officer and treasurer. The REIT made its initial public offering the following year.