Browse Tag: medical office building

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.  For now, let’s look at a national snapshot made up of ten medical sector deal items in a young 2017:

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.

ventas-acquires-arc

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.

Healthcare Real Estate: The “Retailization” Of Healthcare

Abercrombie & Fitch, 5th Avenue

One of the clearest trends in the future delivery of healthcare — and therefore in the utilization and requirements for healthcare properties — is the drive toward outpatient care.  Technological advances and ever-greater specialization in healthcare services means that patients will be spending more health care time in facilities geared toward outpatient services and less time in overnight-stay facilities.

The trend takes care from its traditional delivery center – the hospital – and distributes it to localities.  Patient trips are shorter and integrated into other day jaunts, property signage opportunities are highly valued, and local traffic patterns speak volumes about the success or failure of the modern outpatient  healthcare facility.

If any of these factors and trends sound familiar, it’s because they resemble the retail property value proposition.

At the Real Estate Journal Healthcare Real Estate April conference in Chicago, the blue-ribbon panel discussing Strategies In Medical Office Space acknowledged the retailization of the medical care delivery model  in a variety of ways.  It was agreed that efficiency and competition — as odd as it may be to hear about these time-honored determiners of commerce in the context of healthcare —  would shape the delivery of health services going forward.

Co-Branding: A Routine And An Extreme Case

Much about the outpatient-facility trend makes intuitive sense. 30 million new insured are coming to the market, a wave of consolidations will leave the country with possibly fewer than 100 healthcare networks, and the aging of the population will create radically different balances in property requirements.  Part of that rebalancing will include co-branding and shared space opportunities never before seen on a national scale.

One question from the audience asked about co-brandin trends in the midwest.  Reference was made to a plan in Menominee Falls, WI where a healthcare facility development project was said to be co-branding an as of yet unnamed health club.  I found coverage of this development in Milwaukee media coverage.  A synergy between a healthcare facility and a health club, while not common at all, makes a great degree of sense on its face; health is a concept shared deeply by the two.

But not all property co-branding in medical care has been so intuitive.  Perhaps giving a glimpse into a brave and odd new world in co-branding, was panelist Michael Noto, SVP Management Services group for Healthcare REIT:

“Urgent care operators co-branding with health systems will continue…one [co-branding] that is really kind of crazy is [clothier] Abercrombie & Fitch co-branding with Columbus, OH Nationwide Children’s Hospital. There will continue to be a trend toward co-branding, going back to providing greater visibility, getting whatever leg up ad hospital can get on its competition.  If it means they can pull in a clothing company to do that, they will.”

I wasn’t sure if I heard Mr. Noto clearly — but incredibly, I had.  After checking up, I found a New York Times piece confirming the hospital had renamed its emergency and trauma center after the vendor of preppy duds in 2008 in exchange for a $10M donation.

Long story short: get ready for more bewildering combinations as the inevitable and oh-so-American mixing of health care and commerce proceeds apace.

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