By Barbra Murray, Contributing Editor
San Antonio—USAA Real Estate Co. has taken a notable step forward in the healthcare real estate sector with the formation of a joint venture with HSA PrimeCare, the national healthcare real estate division of HSA Commercial Real Estate. Together, the new partners will acquire and develop a broad range of outpatient healthcare facilities in 11 states across the Midwest.
The healthcare real estate sector may not have the same powerful draw of multifamily right now, but it certainly has an allure that more and more investors are finding increasingly irresistible. USAA RealCo is all in—and for good reason.
“USAA RealCo’s commitment to investing in the healthcare real estate sector is in response to the compelling statistical growth of the aging population’s demographics and the shift in attention to a more retail-oriented model of healthcare services to the patient,” Robert Sult, managing director for office and medical office development with USAA Real Estate Co., told Commercial Property Executive. “As such, this is a long-term investment strategy to include both acquisitions of existing medical office facilities and development of next generation properties in partnership with some of the nation’s leading health system providers.”
It’s a big move for USAA, which is a relative newbie to healthcare real estate, having made its first investments in the sector in 2015. Now, with HSA PrimeCare by its side, the company is well equipped to make a bigger splash. The equity fund’s investments will run the gamut of healthcare property types, including medical office buildings, ambulatory surgery centers, medical wellness centers and cancer centers. And that’s just a partial list.
“Not only do we see this is an expanding sector for institutional capital but it’s also been a proven contrarian performing asset class wherein, during the last Great Recession, healthcare real estate proved to hold its value as well, if not better, than any of the other major commercial classes of product,” Sult added. “It is also a sector of fragmented ownership and we believe that a strategic effort to accumulate a national portfolio of best in class assets will offer our investors both stable cash flow and long term appreciation. People need medical treatment in both the good times as well as the bad! ”
HSA PrimeCare will provide investment analysis, development, leasing and property management services to the joint venture. The Chicago-based company will also bring to the table expertise as an MOB developer and manager, as well as the status of being a leader in the Midwest, thereby giving USAA RealCo a platform for expanding beyond its existing 415,000-square-foot Southeast footprint. The partners have already made their first acquisition, snapping up a 97,400-square-foot MOB portfolio in northwest Indiana and suburban Chicago.
“The closing of this new venture with our partner, HSA PrimeCare, reflects upon our continued execution of a broader national strategy of identifying and partnering with leading, regional sponsors whose primary business investment focus is in the healthcare real estate sector,” said Sult. USAA RealCo established its first healthcare real estate joint venture almost precisely one year ago, joining forces with Brackett Flagship Properties and kicking off the partnership with the acquisition of a 315,000-square-foot portfolio in North and South Carolina and Tennessee. More such joint ventures are on the horizon for USAA RealCo.
“As we identify additional partner candidates for other parts of the country, we will, in turn, expand our national footprint of ownership and relationships with additional health systems,” Sult concluded. “This is a product class that has a high service touch requirement and we believe we will be most effective in partnership with regional sponsors who geographically are in close physical proximity to the portfolio.”