Fortress Eyes Acquisition Of Colony Capital’s $3B Senior Housing, MOB Portfolio

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Fortress Investment Group is in talks with Colony Capital to acquire a portfolio of medical office buildings and senior housing properties valued at $3.3B from Colony, Bloomberg reports, citing anonymous sources familiar with the matter.

The deal would represent a move away from “noncore” assets by Colony, which is currently emphasizing its digital infrastructure holdings, including data centers, cell towers and fiber networks.

Colony inked a deal in September to sell about 200 hotels to Highgate, a hotel management specialist, which valued the indebted properties at $2.8B. In 2019, Blackstone Group bought Boca Raton, Florida-based Colony’s warehouse portfolio in a $5.9B deal.

Colony now refers to its healthcare portfolio as “wellness infrastructure,” according to a recent filing with the Securities and Exchange Commission. That includes senior housing, skilled nursing facilities, medical office buildings and hospitals.

The company earns income from some of those assets under net leases to single tenants or operators and from MOBs that are both single-tenant and multi-tenant. Some of the company’s senior housing properties are managed by operators under a REIT Investment Diversification and Empowerment Act, or RIDEA, structure, which allows tax benefits compared to receiving rent under a net lease arrangement.

For SoftBank-backed Fortress, the deal would represent a further expansion into healthcare assets. The investor previously owned a controlling stake in Brookdale Senior Living, which it took public in 2005. It sold its remaining interest in that company in 2014.

ATI Physical Therapy, a major chain of outpatient physical therapy clinics in the U.S., will go public in a deal with Fortress Value Acquisition Corp. II, a blank check company formed by Fortress.

New York-based Fortress, along with Altamont Capital Partners, recently struck a deal to buy the bankrupt Alamo Drafthouse Cinema, a chain of upmarket movie theaters that was hit hard by the coronavirus pandemic.

 

Source: Bisnow

Medical City Frisco’s Newest Addition

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Medical City Frisco plans to build a $91 million patient building that will add 36 patient care beds to the hospital.

The building will add 118,481 square feet to the facility, bringing the facility’s total bed count to 97. It will have an entrance on Frisco’s Main Street and is being constructed to allow for natural light and include comfortable furnishings, large patient rooms, a spacious waiting area, and 300 parking spaces. Construction is scheduled to be completed in December 2022.

The development is part of Medical City Healthcare’s five-year, $1.1 billion investment in expanding hospitals, adding service lines, building new facilities, and advancing technology systemwide. It comes on the heels of another recent renovation at its Frisco hospital.

Prior to the pandemic, Medical City Healthcare’s  Frisco hospital saw 3,900 admissions and 15,000 emergency room visits. The hospital now has 11 operating rooms, a biplane cardiac catheterization lab, 61 patient rooms, and office space, following the completion of a $54 million, 150,000 square-foot medical office building that opened in June.

The hospital’s growth has mirrored the larger community. Over the last 10 years, Frisco has grown over 70 percent, outpacing any other city in the nation. The city’s population is more than 200,000 people in 2020, an increase from the roughly 117,000 people reported in 2010. It has been ranked America’s fastest growing city and No. 1 in job growth at different points throughout the last decade.

Most of the major health systems have built hospitals along the Dallas North Tollway in Frisco, including Texas Health, Baylor Scott & White, Scottish Rite, Children’s Health, Cook Children’s, and UT Southwestern.

“We are proud to be part of, and continue to invest in, the Frisco community, which continues to grow at a phenomenal pace,” said Patrick Rohan, CEO of Medical City Frisco via release. “Anticipating future community needs helps keep our neighbors healthy and advances our mission to the care and improvement of human life.”

Source: D Magazine

Capturing Value From Health-Care Collaborations

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In the wake of the pandemic, collaboration within and among organizations has become increasingly important—if not necessary.

While turbulent times forged new partnerships across all sectors, some of these preserved and further strengthened their key competencies. Chestnut Funds and Anchor Health Properties’ newly launched Chestnut Healthcare Fund II stands as an example of what can be achieved through perseverance and the successful identification of off-market opportunities. Chestnut Healthcare Fund I was launched in 2015 and raised a total of $50 million, which included the acquisition of 52 assets through direct or joint venture transactions.

In an interview with Commercial Property Executive, Anchor Health Properties Chief Investment Officer James Schmid and CEO Ben Ochs, alongside Chestnut Funds CEO Steen Watson, elaborate on their partnerships and how Chestnut Healthcare Fund I’s success fueled their drive to initiate its successor.

CPE: Tell us more about Chestnut Healthcare Fund II. How does the investment vehicle differ from its predecessor, Chestnut Healthcare Fund I?

James Schmid: The new fund is a follow-up to its successful predecessor, which was our initial health-care real estate acquisition fund. The first fund raised just under $50 million in equity, and we have recently completed placement of these funds. The new fund will continue the investment strategy of medical office acquisitions—primarily core and core-plus assets in major U.S. markets—both through direct ownership and through joint venture investments with institutional equity capital.

CPE: Elaborate on the partnerships you’ve created since you launched Fund I.

Ben Ochs: The initial fund has invested across multiple joint venture acquisitions with both The Carlyle Group and Harrison Street Real Estate. Each of these partnerships continues to expand.

CPE: What kind of assets are you targeting and why?

James Schmid: Core and core-plus medical office acquisitions in major markets continue to be the broadest area of focus. These assets continue to offer attractive risk-adjusted returns and ample debt market liquidity to provide leverage and enhance returns. The Anchor platform has acquired over 50 percent of its recent investments in an off-market fashion, allowing for the continued volume of investment opportunities despite increased investor appetite for sector investments.

CPE: What are the markets you are targeting through Chestnut Healthcare Fund II and why?

Steen Watson: The target market focus generally overlaps with the largest 30 U.S. markets, though we have had particular success building scale in markets such as Boston, New York, Philadelphia, Washington, D.C./Baltimore, Charlotte, N.C., Atlanta, Nashville, Tenn., Denver, San Diego and Seattle.

CPE:Tell us more about the factors and conditions that stimulate growth in the aforementioned areas.

Steen Watson: We carefully evaluate factors such as local demand for health-care services, local population trends, local health-care insurance trends, constraints of supply of new facilities, needs of local health-care systems and medical tenancy, and local and state health-care regulations to make informed decisions about investing in a given market and for a given target asset.

CPE: What are the major changes the medical office sector has seen since the onset of the pandemic?

James Schmid: Perhaps the biggest change was the one that didn’t happen. Health systems and their patients continued to need medical office space to handle patient health-care needs. While elective surgeries—typically the highest margin contributor to medical groups and health systems—generally shut down for 90 to 120 days at the beginning of the pandemic, they quickly reopened and regained previous—and backlogged—case volumes.

While telemedicine became a tool for health-care practitioners in certain circumstances, it did not serve as a replacement for physical space to handle true clinical and acuity needs of patients. Going forward, we see telemedicine as a complement to medical office space for lower-acuity and administrative functions, as opposed to a replacement for said space.

CPE: How do you see the sector going forward?

Ben Ochs: An aging U.S. population will continue to drive demand for additional health-care services in the years to come. Health systems will continue to push to capture market share through expansion into strong demographic locations and through the use of modern, efficient outpatient facilities.

Dedicated facilities for inpatient rehabilitation, behavioral health, memory care and substance abuse should continue to be in demand, fueling opportunities for additional development.

 

Source: Commercial Property Executive