Partners To Bring SCL Health Anchored Facility To Candelas Community

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Mortenson Development, Inc., the development arm of top-20 U.S. builder Mortenson, just announced it will soon break ground on a new 43,732-square-foot Class A medical office building at the intersection of West 91st Place and Candelas Parkway within the rapidly growing Candelas master-planned community in Arvada, Colorado.

Mortenson has worked closely with SCL Health to deliver more than 40 projects over the last decade. This marks the first project on which Mortenson will act as a developer/owner for the nonprofit healthcare organization.

“Access to quality healthcare has never been more important, and we’re proud to be working with SCL Health to bring this primary care facility to the Candelas community,” said Taber Sweet, Director of Real Estate Development with Mortenson Development, Inc. in Denver. “Acting as a development partner on a vital healthcare project like this is one of many ways Mortenson delivers value to its clients and invests in building stronger communities here in Colorado.”

The new two-story facility, designed by Davis Partnership Architects, will provide the Candelas community with convenient access to primary care physicians. Mortenson was responsible for site planning and design services for the development, including managing all entitlements and city approvals. The project team anticipates breaking ground on the new facility later this summer, with completion anticipated in summer 2021.

“With more than 4,300 new homes currently under construction in Candelas, we recognized the growing need for access to compassionate, high-quality and effective care in this community,” said Steve Chyung, Senior Vice President with SCL Health. “This project represents an important expansion of SCL Health’s network of care. Through our work with Mortenson, we look forward to delivering a new facility that will allow us to provide comprehensive, mission-driven care solutions in the heart of Candelas.”

SCL Health provides coordinated care through eight hospitals, more than 150 physician clinics, and home health, hospice and mental health and safety-net services primarily in Colorado and Montana.

Mortenson partnered with Seavest Healthcare Properties LLC in a joint venture to develop the project. Seavest is a sector-specific investor focused on investing in medical office buildings and outpatient facilities of all types that are strategic to hospitals. Seavest has been a recognized owner and manager of these critical assets for more than 30 years.

“We are pleased to join with Mortenson to assist SCL Health to bring healthcare services to Candelas,” says Jonathan “John” Winer, Seavest Senior Managing Director and Chief Investment Officer. “Mortenson has done a terrific job of designing and planning for the project and we look forward to getting in the ground shortly.”

Associated Bank provided the construction financing loan totaling approximately $9.6 million. Since 2012, Mortenson Development, Inc. has partnered on the development of nearly 700,000-square-feet in the healthcare space.

 

Source: HREI

Pro Tips From Medical Office Buildings To Avoid COVID-19

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Do you own or operate commercial real estate? Do you worry how to keep your properties safe during the crisis caused by the novel coronavirus? You can learn a lot from medical office buildings.

Long before doctors diagnosed the first COVID-19 infection, the owners of medical office buildings were thinking about how to stop the spread of disease. They have even identified a few key renovations that make a difference.

“They exercised a high standard for sanitizing their space, even pre-COVID-19, and are acutely aware of the transmission of infection,” says Joseph Fetterman, executive vice president of Colliers’ Healthcare and Life Science brokerage practice in the Philadelphia region.

Medical office owners and investors have a huge motive to prove that their buildings can operate safely, without spreading the novel coronavirus. As the crisis caused by COVID-19 drags on, businesses that can operate safely are more likely stay open—and keep paying rent.

“We have not seen closures of medical office buildings… We are operating fully in the facilities we manage,” says Kimberly Lamb, executive director of healthcare corporate solutions for JLL. “When most other buildings were shut down, our medical office buildings operated throughout, keeping open to serve the physicians and their patients, albeit with a trimmed back staff for the clinics but they operated the whole time.”

Fresh Air Matters

Because COVID-19 is a respiratory disease, owners of medical office buildings focus on how to keep viral particles out of the air in their buildings. Improving the heating ventilation and air conditioning systems can make a big difference, as can bringing more outside air into structures.

“It is common for the property manager to upgrade filters to MERV-13 and increase fresh air supply,” says Connie O’Murray, managing director of property management for JLL. “So far, however, most managers are not installing systems that use ultra-violet light to disinfect indoor air—they haven’t yet been proven to be effective and are not suitable for all buildings.”

Medical office buildings also ask their patients and staff to wear masks—to filter the air they breathe—and manage how their patients move through buildings. Many medical service providers now ask their patients to register online to bypass the risk posed by crowding into waiting rooms.

“Triage for COVID positive patients is being conducted through telemedicine, outside where possible or in isolated space removed from other patients,” says Fetterman. “Waiting rooms are either more distanced by removing chairs or restricting chairs that can be used.”

“It is all about getting them in to see their doctor and back out as quickly as possible,” says Bob Atkins, principal of the Atkins Cos. in a recent podcast for NREI.

“A lobby registration kiosk could also perform this function,” says Audrey Symes, research director for healthcare and life sciences for JLL.

For some medical offices, that means cutting back on staff who share the air in the limited space of an office. Hospital executives are evaluating which positions can effectively be done remotely on a permanent basis.

“We are hearing potential administrative footprint reduction targets of 50 to 75 percent,” says JLL’s Lamb. “Any vacancy administrative space may create would be absorbed by clinical needs as we move forward.”

Keeping MOBs Clean

All medical offices are disinfecting their spaces to at least the standard set by federal officials at the Centers for Disease Control (CDC).

“Some owners are going above CDC standards for operating the facility to be vigilant,” says Lamb.

Disinfection reaches an even higher level if a patient seems likely to carry the virus.

“When we have a patient who has been reported as presenting positive, we shut down the area and path in which the patient took to allow any spores to dissipate and then thoroughly sanitize the areas before opening back up to the public,” says Lamb.

Property managers are also finding ways to use ways copper metal to kill the virus. Coronavirus particles break apart within hours of landing on copper surfaces. In comparison, they can remain active and lethal for days on surfaces like steel or plastic, according to the Smithsonian Institute.

Owners and operators could replace doorknobs and touch plates with brass, which includes enough copper to kill the virus. But that’s often prohibitively expensive.

“What we have heard about and are seeing is copper foil tape wrap on door handles or placed on touchpoints such as elevator buttons,” says O’Murray.

Managers can also reduce the number of surfaces people have to touch by installing automatic doors or kickplates to open manual doors. In bathrooms, managers can slow down the flush times on toilet and install toilet seats with covers to limit the spread of aerosol droplets into the air, according to O’Murray.

Medical Offices Are Used To Controlling Infections

Long before the crisis caused by COVID-19, the professionals who operate medical office space tried to make sure visitors to their facilities did not make each other sick. Most of the techniques above were developed over the years to avoid “healthcare-associated infections.” The majority of medical office buildings are located on a hospital campus, often physically connected to a hospital.

“This alone creates a different mode of operation and management than any other type of real estate,” says Lamb. “There is a higher level of risk.”

The coronavirus pandemic has heightened the danger. Often people who have tested positive for COVID-19 are in the same building as people who are especially vulnerable to the virus, because of age or a compromised immune system, for example.

“Professionally managed medical office buildings are operated as safely, if not more so, than a typical office building,” says Connie O’Murray. “As our knowledge of the virus evolves over time, so, too, do the approaches and innovations towards mitigation.”

 

Source: NREI

Medical Real Estate Still The Best Way To Keep Your Portfolio Healthy

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In 2018, the JSE’s SA listed property index dropped 25%. In 2019, the total return from the index was 1.92%, well below inflation. In the first five months of 2020, the index shed 39%.

Although dividends from listed property grew by 8-12% a year between 2014 and 2017, growth slowed to 3.5% in 2019, which again was below inflation. In response to the economic fall-out from Covid-19, many property companies have warned they will withhold dividends this year to strengthen their balance sheets and until they understand the full fallout from the pandemic.

The data is not looking encouraging.  Office tenants are cutting space wherever possible, having learned that their reduced workforce can work from home. Retail is under enormous pressure across the board, from the legendary brands like Edgars to the smaller independent brands, and restaurants that just don’t have the fire power to recapitalise and pay rents in a market where there are still restrictions and the consumer is unable to come to the rescue.

What’s more, if you are in the hotel and hospitality industry, then there is really no clear path to recovery at this stage and the losses will be devastating.

There’s no refuge in residential property, either. The Lightstone Residential Property Index shows national house price growth in SA peaked at 6.25% in 2014 and has slowed since then to a five-year low of 1.7% in 2019. Lightstone expects, despite the recent interest rate cuts, that growth in the residential housing market will slow again in 2020.

Two specialized sectors of the property market have continued to deliver solid returns throughout the Covid-19 crisis. Logistics is one of the winners due to online e-commerce stores which have enjoyed a surge in online shopping.

The other big winner globally is medical office buildings, whose tenants mostly offer essential services. Even those who had been required to close are already benefiting from a post-lockdown surge in patient visits as medical procedures can, in most cases, not be postponed indefinitely. Think for a moment about your dentist, who will still need to attend to those fillings even if he could not see you over the last three months.

For South Africans who invested in offshore logistics or medical buildings, the rand returns have been considerably enhanced by the latest depreciation of the rand against the dollar.

In the US, the Covid-19 crisis has hit particularly hard, with 134,000 deaths by early July, amid total confirmed cases exceeding three million. Hospitals under pressure to clear wards and scale up for the anticipated flood of Covid-19 patients have had to postpone all elective procedures and turn patients away who were not critical.

This dramatically affected the income of all medical professionals who are not directly involved in treating Covid-19 patients, and has also affected hospitals’ revenue. Even as the US emerges from lockdown, patients choose to avoid traditional hospitals in fear of being exposed to the virus. This has been a boost for medical practitioners working outside the hospital systems, as patients have sought treatment from doctors working from these independent facilities.

Orbvest, which has 19 medical office buildings under management in three US states (Texas, Georgia and New Jersey), noted rental collections declined slightly in April, during lockdown, as about 21 tenants across the entire portfolio of over 100,000 square meters requested deferment.

But by end-June, the net collection of rentals was back to 97.6%, as both Texas and Georgia re-opened their economies, and collections for the month of July already are close to normal. The nett result of the pandemic on our projected revenue will be negligible and we expect to have fully recovered before year end.

Medical property investment was not an unexpected beneficiary of the Covid-19 crisis. The argument for buying into a building tenanted by medical professionals, especially in the US, makes fundamental sense in the long term. In the US, the aging population is growing and requiring more medical care. An investment delivering a proven 8% p.a. in US dollar dividends paid quarterly, plus a capital gain share at the end of the investment period, is an essential part of a diversified portfolio for South African investors.

 

Source: Daily Maverick