A major real estate investment trust (REIT) with a growing footprint in behavioral health properties is going private in a landmark $14 billion deal. Scottsdale, Arizona-based STORE Capital Corp. (NYSE: STOR) announced that it has signed an agreement with Singapore-based global institutional investor GIC and Oak Street, the real estate arm of Chicago-based Blue Owl Capital. The deal, expected to close in the first quarter of 2023, reflects a growing trend of private capital flowing into health care-related real estate, including behavioral health REITs. STORE Capital currently owns 3,012 properties across 49 states and serves 579 customers. The REIT focuses on single-tenant operational real estate in sectors like restaurants, early childhood education, health clubs, and service-focused retail. Manufacturing accounts for 21% of its portfolio, while service-specific retail like car dealerships, ranch supply, and outdoorsman stores represent another 15%.
While behavioral health represents a smaller portion of its holdings, the REIT has significantly expanded in this space over the past five years. As of Q2 2022, STORE Capital owned 89 behavioral health locations—up from 36 in 2017. These assets now represent 3.2% of STORE’s $908 million in base rent and interest, compared to just 1.9% five years earlier. This growth aligns with the increasing role behavioral health REITs are playing in the broader health care real estate sector.
Why Behavioral Health Matters to REITs
Though still a minority portion of STORE Capital’s overall portfolio, behavioral health real estate is becoming increasingly attractive to REITs. The sector offers stable, long-term tenants and growing demand, making it an appealing complement to more traditional holdings like senior housing and skilled nursing facilities. For investors watching behavioral health REITs, the trend suggests stronger opportunities ahead as more operators seek capital partners.
Other REITs are making similar moves. CareTrust REIT Inc. (Nasdaq: CTRE) has expressed interest in repositioning underperforming properties for behavioral health use, while Sabra Health Care REIT Inc. (Nasdaq: SBRA) has entered deals with substance use disorder provider Landmark Recovery (2019) and Recovery Centers of America (2021). These investments highlight behavioral health’s potential as a reliable and profitable segment within health care real estate and reinforce why behavioral health REITs are emerging as serious players.
Investor sentiment supports this momentum. According to a 2022 survey by CBRE Group Inc. (NYSE: CBRE), 38% of respondents identified behavioral health facilities as fitting within their investment strategies. This increasing attention underscores the growing visibility of behavioral health REITs in commercial real estate markets.
The Role of Private Capital
STORE Capital’s decision to go private is also part of a larger story: the rise of private capital in health care real estate. According to a Pitchbook report, the global private capital market held about $3.2 trillion in dry powder at the end of Q2 2022. Of that, $1.24 trillion sat with private equity firms. Importantly, much of that capital resides in billion-dollar-plus funds, which are under pressure to deploy resources into large, stable investments.
Public-to-private transactions like STORE Capital’s are one way to absorb this capital. Depressed stock prices during bear markets often make public companies attractive targets for private equity and institutional investors. “There’s a lot of capital on the sidelines looking to buy companies like this that are public and take them private,” said Andrew Dick, a health care attorney and shareholder at Hall Render. With so much money available, behavioral health REITs could see heightened acquisition activity in the coming years.
This influx of private investment has implications for the behavioral health sector. With REITs seeking to diversify portfolios and investors pursuing long-term stability, behavioral health properties are likely to attract more attention. Operators that partner with behavioral health REITs can unlock capital for growth, relieve themselves of real estate risks, and focus on expanding services.
What This Means for Behavioral Health
For behavioral health providers, the STORE Capital transaction underscores two important points. First, behavioral health has firmly entered the radar of major institutional investors. What was once a niche market is now considered an integral part of the health care real estate ecosystem. Second, capital is flowing into the space in ways that could accelerate expansion and consolidation, particularly through behavioral health REITs.
Real estate has long been a barrier for behavioral health providers, who often operate on tight margins. Access to REIT partnerships can ease these burdens, allowing operators to scale more effectively. “It goes to show that owners of health care facilities are looking, in some cases, for capital partners to take the real estate risk off the table,” Dick noted. “So they go to firms like STORE Capital.” For many operators, aligning with behavioral health REITs could provide a path to sustainable growth.
Looking Ahead
STORE Capital’s $14 billion privatization deal may not be primarily about behavioral health, but its expansion into this sector is telling. In just five years, the REIT more than doubled its behavioral health holdings, and with deep-pocketed private backers, that trend could accelerate.
“This opportunity is an endorsement, by two leading real estate investors with significant access to capital, of the strength of our platform, our experienced leadership team and our disciplined investment approach,” said Mary Fedewa, President and CEO of STORE Capital.
For investors, operators, and patients alike, the message is clear: behavioral health REITs are poised to play a pivotal role in shaping the future of behavioral health care delivery.
