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written by reader Care Capital Properties, Inc (CCP)

By g7e43wk, May 24, 2016

Hello fellow IRREGULARS! I’m a new member AND THIS IS MY FIRST POST. I’m thinking of buying a few shares of CCP and would appreciate any of your input.

Your help is greatly appreciated.

Respectfully,
Chris Alex

”Helping others enriches the world

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Travis Johnson, Stock Gumshoe
Travis Johnson, Stock Gumshoe
May 25, 2016 2:01 pm

Welcome aboard, Chris — I chose OHI over CCP a few months ago when I was putting more capital into healthcare REITs in general. I covered a few of them in response to a teaser pitch in February, and my comment on CCP was:

“Care Capital Properties (CCP), which is the skilled nursing/long term care business that was spun out of the large diversified healthcare REIT Ventas (VTR) about six months ago. It is now, by most measures, the second-largest publicly traded REIT in this sub-sector, behind OHI, and it yields slightly more (almost 8%) and might have the opportunity to grow a little bit faster since it’s smaller and newly imbued with new management that’s focused on just this sector (we can call that the “spin off effect” — companies that get focused management and freedom to grow often do blossom when separated from a company that had myriad other priorities).

“The debt burden is similar to OHI, and valuation is broadly similar (CCP is just a little bit cheaper on most metrics), but they also have a potentially worrisome level of tenant concentration, there are two tenants that make up more than 20% of their revenue. Given all of that, I would have a hard time buying CCP over OHI given OHI’s proven dividend growth and their much more experienced management (and proven ability to integrate acquisitions).

“Buying either of those stocks is, to at least some degree, a bet on Medicaid reimbursement for long-term care and skilled nursing facilities, and I’d have to conclude that regulatory risk is the primary reason that the stocks look pretty cheap compared to other healthcare REITs. Might be worthy of some exposure, given that higher yield and what does look to be a solid growth environment and potential for consolidation, but I would keep that exposure relatively small given the regulatory risk and diversify into other health care REIT sectors as well (mostly medical office buildings and hospitals) if the general idea appeals to you.”

I have not looked into the details for CCP since February, but it didn’t bounce back quite as strongly as most of the more established REITs did following the brief ManorCare-inspired panic in the sector that was just hitting then. In the healthcare REIT sector, I currently have positions in (in order of size): MPW, DOC, VTR, OHI

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g7e43wk
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g7e43wk
May 26, 2016 9:27 am

Thank you Travis for your quick response and input. I kinda jumped the gun and bought MPW on 05/24/16. I was swayed by the huge abnormal volume several days earlier.

Have a rewarding day!

Respectfully,
Chris Alex

“Helping others enriches the world”

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