HOWEVER, FED IS LIKELY, AT SOME POINT, TO TIGHTEN ITS MONETARY POLICY
By Cain Brothers
The healthcare real estate capital markets continue to be robust, fueled by a large pool of equity and debt capital seeking to invest in medical real estate, strong fundamentals supporting the stability of cash flows for medical real estate, and a very accommodating monetary policy by the Federal Reserve.
So what could change? In short, all three conditions could change, but the most likely is the Fed’s monetary policy.
Fed Chairman Ben Bernanke hosted his first press conference on April 27. This could likely be the beginning of a dialogue concerning the gradual shift to a tighter monetary stance. It will be interesting to see how the Fed manages this transition, given its unprecedented expansion of the money supply over the past three years.
First will likely be the end of quantitative easing (i.e., the direct purchase of debt securities), which will be followed by a sale of existing Fed holdings in U.S. Treasuries and other debt securities. This will lead to higher long-term rates.
Pressure is mounting to reduce the federal deficit and bring long-term stability to our national debt levels.
Don’t expect dramatic solutions in the near term or a sharp rebound in the economy to solve this problem.
For the time being, the balance of 2011 looks to be a robust year for the healthcare real estate capital markets even though higher rates and reimbursement pressure are sure to create a more difficult environment in the future – possibly by the end of the year and even more likely in 2012.
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