HSRE Sells $283M Multi-State Healthcare Portfolio

By Keith Loria, Contributing Editor

Harrison Street Real Estate Capital has sold a 12-asset multi-state healthcare portfolio for $283 million to an unidentified buyer.

JLL, led by managing director Mindy Berman and vice president Daniel Turley, represented the seller on the transaction.

“This fit in perfectly with our strategy of acquiring/developing high-quality assets and then packaging the assets in a portfolio exit strategy and taking advantage of a portfolio pricing premium, which in this case was approximately 50 to 75 basis points lower than what we could obtain in 12 one-off transactions,” Brian Mutchler, Harrison Street’s senior vice president, told Commercial Property Executive. “Note that each of the assets were acquired/developed by HSRE and our partners in separate transactions, further speaking to our aggregation strategy.”

The portfolio consists of 655,661 square feet in seven medical office buildings, three in-patient rehabilitation hospitals and two short-term acute-care hospitals, characterized by primarily newly constructed Class A assets. The properties are in Florida, Texas, Nevada, Oklahoma, South Carolina and Indiana.

Mutchler said the portfolio was diversified from both a geographic perspective, with a heavy presence in high-growth areas such as Texas and other Sunbelt states, as well as from a use perspective, as the portfolio contains both your run-of-the-mill medical office properties and higher-acuity assets such as specialty surgical hospitals as well as post acute-facilities such as in-patient rehabilitation facilities.

It’s been a busy week for the company. On Friday, Harrison Street Real Estate Capital completed a $520 million acquisition of a seniors housing portfolio of 11 properties located in the Northeast, from a joint venture of The Shelter Group and its Brightview Senior Living affiliate.

The total occupancy of the properties in the new deal is currently 99.6 percent, with tenants consisting of national and regional health systems and hospitals, as well as local and regional physician groups. Many of the tenants are affiliated with leading national and regional non-profit and for-profit health systems.

“When underwriting medical opportunities, we always look for regions of the country with strong demographics‎ and growth prospects, and look to align ourselves with the dominant medical systems in the area,” Mutchler said. “These assets fit the bill, as they were leased by some of the strongest health systems in the country in high-growth areas. Further, the assets were located in retail-like settings, providing convenience for both patients and staff.”

According to Mutchler, institutional investor interest for the portfolio was substantial, based on the large number of confidentiality agreements signed and qualified offers received.

“A lack of quality healthcare portfolios in the market in 2014 made an offering of this size and quality ‎extremely desirable and guaranteed to be highly sought after by institutional investors,” he said. “Also, HSRE and our partners successfully stabilized some of the assets that required lease-up during our ownership period, as well as delivered the developments on time and under budget, so it was the right time to sell from a business-plan perspective.”

HSRE aggregated the portfolio through single-asset acquisitions and development with four operating partners, with capital from Harrison Street Real Estate Partners III, the third private fund in HSRE’s opportunity fund series.

Overall, Harrison Street has achieved more than $2 billion in asset sales, making it the largest real estate manager to acquire, develop and sell assets within the education, healthcare and storage segments.