Browse Category: Medical

Ten Medical Property Deals This Year

The medical property sector continues to heat up nationally thanks to the greying of the population and the decentralizing trends in outpatient care. Medical office building (MOB) and retail retrofit deals are coming out of the pipeline in strength for the time being as Congress once again aims to repeal the Affordable Care Act. Only the future will tell if ACA’s repeal and replacement with “insurance for everybody” as promised by the incoming Trump administration will put a damper, a rocket booster, or something in between on the commercial property deals in the medical sector.  

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Chicago Panel Diagnoses Causes Of Consolidation In Medical Property

 

Biznow Conference Image

A distinguished panel of six commercial real estate experts took the stage in Chicago last week to share perspectives on the radically changing property market for health care.

Assembled at Bisnow’s 4th Annual Chicago Healthcare Real Estate event was a collection of operators, brokers, designers and developers of medical space, including Loyola University Health System’s Director of Real Estate Mike Becker, who kicked things off with an answer about what’s driving consolidation in the space.

“Size drives leverage and size drives scale,” said Becker.  “It’s very important to a lot of folks acquiring space [that they get] to that significant size. The reality is that $130 billion has been pulled out of Medicare/Medicaid reimbursements, commercial payers have cut reimbursements significantly, so the larger you are, the more ability you have to negotiate buying power and larger reimbursements.  Also, the play today is access to capital, and health care is still a bricks and mortar business…access to capital is easier and flows more freely if your size is more significant.”

John Wilson, President of healthcare property advisors HSA Primecare, added that consolidation was a confluence of three major trends: “Demographics, regulation and technology.  In demographics, you have baby boomers, an estimate of 10,000 a day turning 65.  So there’s ongoing pressure to the systems.  With regulation, of course front and center is the Affordable Care Act, which is not only bringing the newly insured to the health care industry, it’s also shifting payment method from a fee based method to a value-based method, which is really driven by quality of care outcome.  And then of course, technology – more and more procedures are moving to outpatient settings.”

Watch The Source for more coverage of the Bisnow Chicago Health Care Real Estate event.

 

Three REITs Starting 2015 With Strong Health Care Acquistions

REITs aren’t just a channel for equity-style investment in commercial real estate, they’re a kind of barometer to use to keep an eye on trends in specific sectors. When REITs go on a buying spree, it pays the trend-watcher to pick out what’s being acquired as well as the price tags. This way questions can be answered about where capital is meeting property – is it in tertiary or secondary markets?  Is medical office looking better to portfolio managers than is assisted living? Presented are some of January’s biggest REIT acquisitions in the health care sector.

1.  Griffin Capital’s Griffin-American Healthcare REIT III picked up more than $340 million in health care property in January.  The 19 acquisitions broke down into 17 medical office buildings, one acute care hospital, and one senior housing facility.

“These latest acquisitions represent high-quality assets leased by very strong tenants and operators with whom we look forward to sharing mutually rewarding business partnerships,” said Danny Prosky, president, chief operating officer and one of the largest stockholders of the REIT. “They also add tremendous diversification to our rapidly growing portfolio.” 

Notably, the REIT has announced that it has executed letters of intent and/or purchase and sale agreements to acquire 31 additional healthcare properties for an aggregate purchase price of approximately $530 million. These pending acquisitions are subject to customary closing conditions and the satisfaction of other requirements as detailed in the agreements.

2. Leading the three in dollar amount, Ventas completed a whopping $2.6 billion merger with American Realty Capital Healthcare Trust that netted 143 health care properties. This breakdown was more diverse than Griffin’s, as medical office buildings added up to half of the portfolio. The other half was more or less evenly taken up by assisted living, hospitals and senior housing.  The full breakdown: 78 medical office buildings, 29 seniors housing operating communities, 13 seniors housing triple-net properties, 14 skilled nursing facilities, 7 hospitals, and 2 land parcels.  For a look at where these properties are, click on Ventas’s map below.  Read about the merger in full at this PDF.

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3. Health Care REIT acquired a portfolio of Massachusetts, New Hampshire and Connecticut assisted living facilities for $360 million. The deal was completed in January and represented a profitable turnaround for the seller, Intercontinental Real Estate of Boston. The Boston Globe reports Intercontinental purchased the portfolio in 2005 for about $152 million and later put in about $20 million in renovations. The poftiolio consists of nine senior living facilities.

The Island New York City Forgot

The view from North Brother Island in NYC

Introducing North Brother Island. It’s a once-developed island overgrown with trees. By itself, maybe not so interesting. But we are told in this business that location is everything, so it comes as a shock that this abandoned island is situated between Queens and the Bronx in New York City. You read that right: it’s New York real estate that has yet to be paved over.

The history of North Brother Island is fascinating, including a stay by the early 20th century legend “Typhoid” Mary Mallon, a hospital and a drug rehabilitation center, but most telling is the view from the highest point on the island. In the foreground, a broken brick chimney rises from the untamed trees, and in the background, the unmistakeable gotham skyline. Magnificent and creepy all at once.

Check out the entire photo essay at  An Abandoned Island Near NYC Used To House A Hospital.

[Photo credit: Sliptalk.com]

Ventas Healthcare REIT CEO Debra Cafaro

REIT.com’s latest video touches on the topic of the entire medical properties market by way of a chat with Debra Cafaro, CEO of the medical properties REIT Ventas (VTR).  Ventas is a major player in medical properties from hospitals to senior care and from national to international markets, working, as do all REITs in the sector, as a channel for Medicare payments to be transformed into dividends distributed to shareholders. Cafaro says of the healthcare market that a mere 15% of US healthcare properties are present in REIT portfolios, but if she and her competitors have anything to do with it, the acquisitions will only pick up steam as time goes on.

 

Marketing Medical Office Buildings With Video

The overlap between health care and commercial real estate is a special territory that requires traditional broker/agent/manager skills be directed and shaped to serve the needs of medical practitioners.  Doctors on both the buy and the sell side of medical office property deals stand on unfamiliar ground as they feel the pressure of medical consolidation and other trends in health care in a post-Affordable Care Act world.  Real estate professionals need to know how to help.

Delaware County, PA brokers Jacobs Realty Group seem to have a handle on the problem.  I recently noticed their video promoting brokerage services to the medical office building marketplace and thought they had hit it out of the park.   It’s an example of great success in messaging to this unique market.

Breezy without being cloying, informal without being useful, and fully aware of the office property challenges many doctors face.  Not too short, not too long and so ideal for social media.  If you ask me, medical office property marketers across the country could take a tip from their example.

 

Next-Gen Medical Research Facilities Rethink Foot Traffic

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Brigham Building For The Future

Since breaking ground in 2013, Boston’s Brigham Building For The Future is a project that has been turning heads around the medical property community for its unusual approach to specialization and foot traffic.  The 11-story, 620,000-square foot project is located on the campus of Brigham and Women’s Hospital in the city’s Longwood Medical Area and will house nine floors of medical research with two floors of medical clinic area.

A major premise behind the research building design according to architect NBBJ is to support what’s called translational research — a modern conception of scientific research that, in short, makes immediate bridges from the scientific work to the practical applications.

What’s New In Space Allocation

Traditionally, most medical research takes place in spaces separate from clinical spaces.  An invention or innovation in medical care can take years to develop and further years to be applied to patients. Translational research is a way to radically shorten that extra time by quickly “translating” findings in basic or pure research into meaningful health outcomes.

The building design that supports translational research is one that intentionally mixes foot traffic flows.  From a property management standpoint, the usual medical office principles of space specialization are turned on their head: the intent is to put researchers and doctors in the same spaces, the same hallways, the same atria, the same conference rooms.

NYU’s 227 E. 30th St.

Exemplifying the trend is another early adopter in New York.  New York University’s Langone Medical Center’s Translational Research Building.   Stressing the integration of space users of both medical/clinical and research purposes, the building houses a great deal of “dry lab” research space — labs that more resemble traditional office space in that the bulk of the work is done on electronic or computer equipment and not “wet” test benches with flasks and bunsen burners.

Patients Included

As health care continues to evolve in the US, the responsibility levels of both providers and patients for improving outcomes is on the rise.  Because US health care costs too much and produces too few positive health outcomes when compared with other world democracies, it follows that health care needs to become a smarter conversation and collaboration between patient, researcher and doctor.  By rethinking clinical space, translational research spaces facilitate these conversations uniquely.  At the same time, they provide efficiencies of space that the entire industry is seeking, expressed in waves of medical office consolidations.  Expect to see more of these kinds of translational research medical properties in all markets as US health care continues to evolve and improve.

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When A Hospital Closes

English: Looking east from Grand Concourse acr...

The health care industry is going through a series of stark trends that affect economic relationships between hospitals and nearby commercial property. The site selection of large hospitals has always had a major effect upon the fortunes of surrounding retail, and nowhere is that relationship felt more keenly than in the urban setting. So when such hospitals close, the prospects tend to dim for the restaurants and convenience stores nearby dependent upon the thousands of foot-traffic customers the hospital attracts.

While there is no discernible wave of hospital closures nationally – despite what some strident political opponents of the new Affordable Care Act law say – there is a pair of trends in healthcare that are reworking the economics of health care property.  The first trend is medical consolidation.  Consolidation is the concentration by purchase of medical properties under a single provider network, more or less characterized by the independent neighborhood clinic becoming a satellite of a large provider or hospital / network. Consolidation tends to not spread disruption in urban settings as the changes are in ownership and operations, leaving doors open and a stream of patients and families untouched.

The more disruptive trend in terms of property is found on the other side of the first one.  Increased patient flows to neighborhood clinics are being driven by hospitals increasingly spinning off outpatient care such as dialysis and MRI imaging to these satellite clinics.  With the large hospitals facing aging facilities and a increasing concentration on inpatient care, facilities built for both decades ago fall out of favor and closure becomes more likely.

And that’s bad news for the surrounding business property performance.  One illustrative example comes from the Lincoln Park neighborhood in Chicago, where the recent closure and moving of Children’s Memorial Hospital has left the neighborhood in a retail “dead zone”.

According to an analysis by the Lincoln Park Chamber of Commerce, more than 1.5 million people visited the hospital each year, for an average of 4,100 people a day.

When the hospital moved to Streeterville in June 2012 and became the Ann & Robert H. Lurie Children’s Hospital, it took more than 4,300 employees with it, according to the chamber.

One of the businesses that decided to pull the plug on its Lincoln Avenue location, Costello’s Sandwiches, has had success at its other three locations for years.

The Lincoln Avenue location lasted only seven months.

“Our original thought was we really liked the space,” said Rob Procell, co-owner of Costello’s. “I think that specific location being on that stretch of the street is going to turn into a dead zone.”

Lincoln Ave. a Dead Zone Without Children’s Memorial, Business Owners Say – Lincoln Park – DNAinfo.com Chicago.

Medical Real Estate: Demand Higher Than Ever

English: A roadside sign at Santa Clara Valley...

Changes underway stemming from the Affordable Care Act are shifting the national healthcare landscape. The US heath care system is bracing for the addition of 30 million previously uninsured patients while at the same time undergoing a series of business transformations that come with significant real estate effects.

Preventative, specialized and routine care is being more broadly distributed to outpatient facilities and away from monolithic hospitals.  At the same time, a wave of business consolidations is taking place where standalone “doc-in-a-box” small medical centers are finding institutional buyers in increasing numbers.  The buy and the sell side are heating up in medical office property, but even that isn’t where all the action is.  On top of these shifts, retail chains long doing pharmacy business are opening clinics for primary care, modifying space calculations and opening new avenues of opportunity for customer engagement.  In ten years, your average trip for medical care will not look like it does now, from the property to the practices.

Consolidation Trend Fueling The Buy And Sell Side

There are two main directions the delivery of healthcare services are leading: acute care is being consolidated into ever-larger hospitals that amass resources, share space and achieve economies of scale, while outpatient care is being distributed throughout communities. In Leslie Braunstein’s Urban Land Institute piece “How Changing Healthcare Delivery Will Affect Land Use”, the numbers are run and the difference is clear:

With improved medical technologies, an increasing number of treatments, tests, and procedures can be conducted on an outpatient basis; as a result, the average hospital stay has decreased from 7.2 days in 1988 to 5.5 days now. And while the total number of hospital beds has decreased, the percentage of physicians employed by hospital groups has increased to 50 percent and is growing. 

Although increasingly employed by hospitals, physicians and other practitioners are bringing medical care into a distributed network of satellite-type facilities scattered throughout communities, noted Eric W. Fischer of Trammell Crow Company. These include everything from medical office buildings to walk-in clinics located within retail stores such as CVS, Walgreens, or Wal-Mart. The next level, he said, is the “outpatient pavilion” where specialists and sub-specialists can share technology and resources. Finally, there is the acute care hospital. 

Demand Is Up For Medical Office And Outpatient Facilities 

The multibillion market for present and future healthcare space shows heightened demand as long-standing assumptions about healthcare are challenged and efficiencies sought.  Highlighted by Sue Ter Maat in Amanews: 

Medical office and outpatient facilities sold for nearly $6 billion in 2012, higher than the 2006 peak of $5.5 billion. Sales of medical office buildings exceeded $2 billion in 2012, more than double the previous sales record set in 2007, according to real estate developer and manager Jones Lang LaSalle’s health care report, issued in May. The company said it wouldn’t be surprised if more records are set in 2013. The report tracked medical office buildings that are more than 25,000 square feet.

The sales increase is partly due to the big push for more outpatient care. Medical office buildings performed well compared with other real estate classes, especially during the economic downturn in 2009, said Mindy Berman, managing director of capital markets at Jones Lang LaSalle.

Less Is More: Standalone Emergency Rooms 

Not fitting into other trends is the appearance of the standalone emergency room, as currently under discussion in Alabama. At first glance, the economics of this development trend seem to make little sense: emergency room care is uniformly more expensive than other kinds, such expense having been a major factor in preventing people from seeking care until their conditions make it impossible to avoid.  Nonetheless, Alabama is voting on wether or not to undertake more of these ER-only properties.

BIRMINGHAM, Alabama — Free-standing emergency departments — emergency rooms not physically attached to its parent hospital buildings — are in an odd situation in Alabama.

Three of these standalone ER’s are approved by health regulators to be built  — all in the Birmingham area.

But there are no rules to regulate them.

Demand outpacing a state’s regulatory ability is an old story and not limited to a single state.   Keeping an eye on these developments in Alabama might give us a clue about ER-only adoption across the country.

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