Healthcare Real Estate Investors Choose to Diversify in Face of Fever-Pitch Property Demand

It’s a highly competitive environment when it comes to healthcare real estate out West, so say InterFace Conference Group’s Healthcare Real Estate West panelists.

One of the central themes of the day-long conference, which was held March 6 at the Omni Los Angeles and attracted 219 attendees, was the pent-up property demand from investors. However, most panelists agree the opportunities are somewhat limited due to a lack of new product and the long-term holding pattern many healthcare investors have adopted.

“You have all this demand, yet transaction volume is staying flat,” said Darryl Freling, managing principal at MedProperties Realty Advisors and moderator of the 2019 Outlook panel. “Where’s the bottleneck? So much is held by healthcare systems and they’re not letting go because clearly there’s just so much demand.”

Shane Seitz, fellow panelist and senior vice president at CBRE, doesn’t see this level of trading picking up, at least not with the current healthcare supply.

“REITs don’t get incentivized to turn over their product,” Seitz noted. “They buy and hold. They treat it just like the nonprofit health system does. They want to have it forever. We also have foreign and domestic groups coming in. They historically invest in funds, but now they’re saying, ‘You know what, I’m going to buy strategically in this space.’”

Seitz further noted that the level of capital in the healthcare real estate sector was around $6 billion in 2008. It’s now $12 billion.

“It’s that instant capital coming in,” Seitz explained. “Everyone has read the headlines about healthcare and they want to buy.”

This frustration has caused many healthcare players to pivot. After all, what happens when one investment vehicle dries up? You look elsewhere. That’s led to diversification.

“Healthcare real estate has really changed a lot over the past 20 years,” said fellow panelist P.J. Camp, principal and co-founder of H2C. “It used to be it was just medical office buildings of 40,000 to 60,000 square feet, two to three stories, on a health campus. This is not at all the case now. With all the capital flooded into our space, it’s driven the product type to be much more diverse.”

Healthcare real estate, for many, now includes not just hospitals and standard medical office buildings (MOBs), but skilled nursing facilities, satellite buildings, home health services, wellness centers, walk-in clinics, seniors housing, micro hospitals and rehabilitation and long-term care centers.

“I never would have thought of seniors housing and long-term care as the world we play in,” Camp continued. “I don’t know when that changed, but seniors and medical buyers have come together. MOB means so many different things now. It’s confusing the market a little bit. We used to know what an MOB was. Now we have to think of all these different products and uses in terms of long-term viability. It’s a very complicated market today. It used to be so simple.”

Community-Driven

One of the largest motivations for the diversification in uses is the community-driven, patient-facing approach many are taking to healthcare nowadays. Deeni Taylor, fellow panelist and executive vice president and CEO of Physicians Realty Trust, believed this is where the focus should have been all along, meaning this “pivot” is essentially a return to Healthcare 101.

“The successful operation of all these products is dependent on the goal of the healthcare organization,” Taylor said. “If it’s for the patient, the probability of success is much higher. If it’s simply a reimbursement scheme, that real estate play is a disaster. It’s just a matter of time. That’s just not a risk we’re willing to take as a public company.”

Karen Costello, senior program manager at Hoag Hospital and participant on the Hospitals & Systems panel, believes organizations will need to embrace the patient and their care as the industry faces two major hurdles.

“We need to be flexible and develop new places to engage with consumers and we have to create stickiness with them because we have to deal with two tidal waves: the aging demographic and tech distraction,” Costello said. “They’re both coming. The question is what’s going to hit first and will the two clash?”

Panelists note that this creates an interesting conflict, as seniors prefer a more personal approach to healthcare, while the younger generation appreciates technology that prevents them from having to physically visit a doctor’s office.

Convenience-Driven

Unless an organization is in a specific niche, such as seniors housing or wellness and preventative care, companies must accommodate both populations and preferences. One of the easiest ways to do this is through micro hospitals, walk-in clinics and ancillary service providers, such as home healthcare agencies.

“We have a disruption issue,” said Jeff West, Hospitals and Systems panelist and executive director of Irvine, Calif.-based Providence St. Joseph Hospital. “The disruption from within is incremental. The continuum of care keeps marching on. What we really need to get to is healthy populations. That’s keeping people out of the hospital. That now involves delivering doctors and nurses to patients’ homes. That’s a very viable, cost-effective model.”

West also says that outside disruptors, chiefly Amazon, are advancing and revolving their model around artificial intelligence. The e-commerce giant recently joined forces with Berkshire Hathaway and JPMorgan Chase on a healthcare company called Haven. The joint venture’s focus is threefold: better access to health providers, easy-to-understand insurance benefits and affordable prescription drugs. Haven will only be available to employees of the three firms, at least for now. The joint venture has stated it eventually plants to share its findings with others outside its network.

Costello sees this play as one the current healthcare industry will need to respond to — and quickly.

“We need to start looking at healthcare as a lifestyle brand,” Costello said. “All healthcare needs to start reflecting wellness. We need to create ‘easy’ so we can be around when people like Amazon come to market. Healthcare has to be somewhere where people want to be. We’re marching down this brand of consumerism, and consumers want to be in Newport Coast. They want to be at the Irvine Spectrum Center.”

John Wadsworth, senior vice president of Colliers and a Leasing & Operations Update panelist, believes partnerships and one-stop shops are where the industry is headed. In fact, he believed retail and healthcare have more in common than many may think.

“Healthcare is retail,” Wadsworth said. “Retail conversions are a real opportunity. How many mall operators have reached out and said, ‘Help us. Be our savior’? It can work. The fundamentals of those spaces can work. They’re not an end-all, be-all solution, but they’re here to stay.”

Pacific Medical Buildings (PMB) is one firm capitalizing on this opportunity. The firm is converting the 50,000-square-foot, 1980s-era Harkins Theatre in Goodyear, Ariz., into a build-to-suit medical office building.

“Converting the movie theater drove down costs and gave us speed to market,” said Jake Dinnen, senior vice president of development for PMB and a Trends & Market Forces panelist. “It was 98 percent leased from day one.”

Connection-Driven

Another retailer has caught Costello’s eye as she calculates the “stickiness” formula for consumers: CVS/pharmacy.

“We use CVS as a benchmark,” Costello said. “With MinuteClinic, they’ve got easy down. They’re convenient, they’re connected. They don’t have specialist physicians. Health systems need to play in that space if they’re going to do prevention health. CVS has established a stronghold there. We need to watch them carefully and meet and exceed them in the way they’re embracing the consumer.”

The lack of specialist physicians means CVS can only have so long of a reach. It also reinforces the notion that partnerships will maximize everyone’s value.

“We really need to know where CVS starts and stops, and where we then start,” said Jeff Land, senior vice president of corporate real estate for Dignity Health and fellow Hospitals & Systems panelist. “When you work in population health, it really becomes about who you partner with because you don’t have to be an expert in everything.”

Whether it was CVS, Walmart, Amazon or each other, panelists agreed competition was out there. Neil Carolan, senior vice president of Rendina Cos. and a Trends & Market Forces panelist believes in mutually beneficial partnerships, noting that 80 percent of his firm’s business is repeat business. One relationship he’s focusing on currently is with retail landlords,

Carolan adheres to the old saying, “if you can’t beat hem, join them” — or at least move in alongside them. “Will people go to a doctort next to Macy’s?” Carolan asked. “Probably. They like to put pediatricians near grocery stores. Mall redevelopment is going to be a big trend. We’re doing several of them. The pipeline is long. Competition doesn’t scare me. I don’t think it scares anyone. Bring it on.”

 

Source: REBusiness Online

Bank, Office Building Out; Medical Building In: Redevelopment On The Way In Southeast Denver

Redevelopment is coming to the corner of Hampden Avenue and Oneida Street in southeast Denver.

A rendering of the planned medical building. (PHOTO CREDIT: Centura Health)

Health care system Centura Health plans to build a 24,000-square-foot medical building at 6900 and 7060 E. Hampden Ave., according to a site-development plan submitted to the city.

Centura, which is the largest health care system in the state, purchased the two parcels, which combined are 1.63 acres, in 2017 and 2018. Acting as Portercare Adventist Health, Centura purchased the 0.41-acre lot at 7060 E. Hampden Ave. in December 2017 for $1.9 million, records show. The lot included a 7,200-square-foot office building with seven tenants.

In December 2018, the health care company purchased the 1.22-acre 6900 E. Hampden Ave. parcel from UMB Bank for $3.34 million. UMB previously operated a branch at the site, but left the building in favor of a new one it built closer to the intersection. It opened there in October.

The former bank has since been demolished, and the office building will follow within a few months, according to Deb Carpenter, Centura’s director of clinic operations. Records indicate that the two-story facility Centura has planned — which will include a freestanding emergency room — will have the address of 7000 E. Hampden Ave.

“Centura was very interested in this area because through some work we did analyzing the area, we realized there really isn’t anything in that area for emergency care,” Carpenter said.

Boulder Associates Architects drew up plans for the new facility, which Carpenter said will open in May 2020.

Denverite reported in May that Councilwoman Kendra Black had been lobbying for a project called “Parkside,” which would have oriented new businesses toward Southmoor Park, located south of Hampden Avenue.

Centura Health is a subsidiary of Florida-based AdventHealth (formerly Adventist Health System) and Catholic Health Initiatives, based in Englewood. The two health systems partnered together to form Centura Health in 1996, which now operates 17 hospitals across Colorado and western Kansas.

Elsewhere in the state, Centura recently paid $30 million for 57.8 acres in Colorado Springs to build a third campus in the city.

 

Source: BusinessDen

Convene Partners With Healthcare Startup To Put Clinics In Coworking Spaces

As part of its effort to be all things to all office users, Convene is bringing a new kind of amenity to flexible offices.

A new partnership with healthcare startup Eden will place clinics within Convene‘s flexible office footprint. The clinics can serve as primary care contacts for Convene members and other office tenants in the building, and can use virtual healthcare technology to consult with specialists and save square footage.

Convene has been testing its model with Eden for a year, and plans to open at least 25 locations across its existing footprint across the next 18 months, according to the announcement. Its roll-out will begin in New York, Chicago, Philadelphia, Washington, D.C., Boston and Los Angeles later this year.

Convene started out as a provider of on-demand event spaces, then transformed itself into a flexible office space operator in February 2018 by partnering with landlords rather than renting from them. Like coworking name brand WeWork, it has added elements and offerings at a rapid pace, driven by investment capital from real estate sources such as Brookfield and RXR Realty.

In September, Convene began offering its design and flex office management services as a service to landlords, rather than a branded entity within their buildings. Similar in concept to WeWork’s Powered by We service, it reflects the office industry’s growing acceptance of flexible office providers as not just a subletter, but an amenity. Convene‘s partnership with Eden adds to the modern concept of an office that draws employees in by filling more of their needs beyond desk space.

 

Source: Bisnow