Cornerstone Companies MOB Fund VI Acquires 12 Medical Properties In Nine States For $48.7 Million

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Cornerstone Companies, Inc. has closed on its sixth medical office building portfolio; acquiring 12 healthcare real estate properties in nine states totaling more than 155,000 square feet.

The properties have been acquired by Cornerstone Fund VI for $48.7 million by Cornerstone MOB Fund VI, a private equity fund focused solely on medical  real estate. Cornerstone is the fund’s general partner.

The fund’s portfolio includes six individual clinical MOBs, three clinic/ambulatory surgery centers, an imaging and diagnostics center, a senior care facility, and a single stand-alone ambulatory surgery center. The facilities are located in the Midwest, Southeast and Southwest

The Fund VI portfolio assets include:

• Gateway Clinic Medical Office Building in Moose Lake, MN – an 18,000-square-foot medical office building on the campus of Essentia Health’s Moose Lake Hospital, which is a level IV trauma center. Gateway Clinic is the largest independent multi-specialty practice along the I-35 corridor which connects Minneapolis and Duluth. Gateway Clinic provides five core specialties including general surgery, emergency medicine, family medicine, obstetrics and internal medicine.

• Owensboro Dermatology ASC in Newburgh, IN – a 10,000-square-foot dermatology clinic and ambulatory surgery center scheduled to be completed in November 2021. The new ASC and clinic will have eight exam rooms, four procedure rooms and one operating room. Owensboro Dermatology Associates is the market leading dermatology practice in the Evansville-Owensboro market, and the second-largest dermatology practice in a 100-mile radius of Louisville, KY.

• Vanderbilt University Medical Center Shelbyville Clinic in Shelbyville, TN – a 16,000-square- foot multi-specialty clinic including women’s health, endocrinology, internal medicine, wound care, family medicine, pulmonology and sleep medicine. VUMC operates nine hospital systems and 48 hospital locations, inclusive of clinics, physician practices and affiliates practices.

• Crestview Medical Office Buildings in Crestview, FL – three medical office buildings comprising more than 25,000 square feet on the campus of North Okaloosa Medical Center, approximately 45 minutes northwest of Pensacola. The buildings feature multi-specialty clinical space, including urology, cardiology, rehab, podiatry, primary care, sleep lab and human resources.

• Keystone Eye Associates ASC & Clinic in Philadelphia, PA – a 14,000-square-foot, full- service ophthalmology clinic and ambulatory surgery center. Keystone Eye Associates is one of the leading ophthalmology practices in Philadelphia, PA. Amongst 18 independent ophthalmology practices in Philadelphia, Keystone Eye Associates is the highest performing as ranked by procedure volume.

• Atlantic Gastroenterology and Endoscopy Center in Greenville, NC – a 9,000-square-foot outpatient endoscopic facility specializing in colorectal cancer screening and the treatment of various diseases involving the digestive tract. The property houses the twenty-year-old practice clinical practice as well as a two operating room ambulatory surgery center.

• Hollywood Diagnostics Center in Hollywood, FL – a 9,500-square-foot full-service diagnostics center including open and high-field MRI, CT scan, PET scan, mammography with 3D tomo,  ultrasound and x-ray. The facility treats more than 30,000 patients per year.

• Surgery Center of Baton Rouge in Baton Rouge, LA – an 11,000-square-foot ambulatory surgery center which is home to the joint venture between Surgery Partners, Inc. and five leading  interventional pain specialists. Surgery Partners is a leading operator of surgical facilities, with more than 180 locations nationwide. The Surgery Center of Baton Rouge is the market leading interventional spine practice providing procedures, therapeutic injections and neurostimulation in a state-of-the-art setting.

• Henry Ford PACE Senior Care in Pontiac, MI – a 30,000-square-foot facility providing primary and specialty care, physical therapy and assisted living services for aging adults. PACE of SouthEast Michigan is a joint venture between Henry Ford Health and Presbyterian Villages, the largest assisted living operator in Michigan. PACE of Southeast Michigan operates six facilities in southeast Michigan and is a nationally recognized leader in the Program of All-Inclusive Care for the Elderly (PACE.)

• OrthoArizona MOB in Mesa, AZ – a 10,000-square-foot medical office building that is 100- percent leased to OrthoArizona, the second-largest orthopedic practice in Arizona. The MOB provides clinical orthopedics, podiatry and physical therapy services.

All of the Cornerstone MOB Fund VI assets are supported by net leases with a weighted average lease term for the entire 12-property portfolio of more than 10 years. Fund VI is projected to deliver a five-year average cash-on-cash yield of more than 11 percent to its investors.

Cornerstone has acquired more than $150 million in healthcare assets over the past four years amongst five other Cornerstone MOB Funds. Cornerstone sold MOB Fund I in 2018, generating a 17-percent IRR for its investors. Cornerstone MOB Funds II, III, IV and V generated cash-on-cash returns in 2020 of 11.51percent, 11.49 percent, 10.51 percent and 12.03 percent respectively.

About Cornerstone Companies, Inc.

Cornerstone Companies, Inc. is a leading healthcare real estate firm, drawing on more than 35 years of experience. With an exclusive focus on the healthcare real estate industry, Cornerstone helps physicians, hospitals, and third-party owners across the nation develop, build, lease, manage and optimize their healthcare real estate while enhancing the patient and provider experience. To  date, Cornerstone has successfully completed more than $1 billion of medical office developments and currently manages more than 100 medical facilities encompassing 7.7M SF. To learn more, visit cornerstonecompaniesinc.com.

 

Source: HREI

How Venture Capital Funding Could Give Office A Much-Needed Boost: Healthcare/Life Science Sectors Gained 20% Of Global VC Investment

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Hiring data across hundreds of firms that received venture capital-backed funding may provide a clue into how those cash infusions will impact CRE, according to a new report from Newmark.

The 500 US firms Newmark analyzed and cross-referenced against LinkedIn data raised a total of $44.9 billion and posted 22,582 job openings since April 2021, translating to about 3.4 million square feet of CRE demand. That’s about 7,500 square feet of demand for every $100 million raised, if you assume 150 square feet per worker. If you assume 200 square feet per worker, that equates to 10,000 square feet of demand per $100 million raised. But Newmark analysts say these numbers are likely “considerably lower than the reality.”

Here’s why: according to LinkedIn, about 85% of jobs are filled by networking, and not every company uses the platform to find candidates. And what’s more, the survey occurred in early July, meaning some of the companies funded since April have already filled open jobs.

“Total employment growth from the sample set is likely anywhere from 30.0% to 50.0% higher than what the job postings data suggests,” the report notes. “This means that even using a ratio of 10,000 square feet of demand for every $100 million raised is likely far below the reality, possibly by half. Anecdotal evidence shows the ratio is likely something closer to 25,000 square feet of demand for every $100 million raised, but a number that is easily and logically defensible is a minimum of 15,000 square feet per $100 million raised.”

So far this year, $315.3 billion in new VC money was raised globally, with $166.4 billion raised in Q2. Prior to the pandemic, annual VC investment had averaged around $164.1 billion annually. The B2C and healthcare/life science sectors have gained the most market share and account for about 20% of global VC investment each.

The US is the dominant market for new VC investment, according to Newmark, and accounts for more than half of all funds raised, followed by China. Since the first half of the year, VC funding in the US has been focused mainly on artificial intelligence, fintech, TMT, SaaS, and big data.

“Under normal circumstances, these numbers would suggest a commercial real estate boom in the making, at least within markets where there is a heavy tech focus,” the report states. “They still do, though it will be tempered by the pandemic.”

 

Source: GlobeSt.

Trends And Challenges To Watch In Post-Pandemic Health-Care Construction

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A year ago, predictions indicated a spike in health-care construction planning and development across the country.

However, the post-COVID-19 shift is trending away from the traditional model to an emphasis on outpatient care to offload pressure from hospitals’ main campuses, according to Richard Simone, CEO & president of Central Consulting & Contracting, a construction management and general contracting company that specializes in health-care facilities.

In an interview with Commercial Property Executive, Simone explains why health-care construction is trending toward smaller outpatient care facilities and clinics and discusses challenges within the sector.

CPE: How has the initial health-care construction model changed since the onset of the pandemic? 

Richard Simone: The factors causing changes in health-care construction are largely due to labor shortages, limited or slow-to-get resources and new operational requirements. Since the start of the pandemic, we continue to do more tracking of workers and data logs on construction sites. For example, we’ve implemented contact tracing logs of when workers enter and exit work sites, temperature checks, cleaning logs, social distancing, no gathering for breaks etc., some of which affects the length of time now needed to complete certain projects.

Also, supply chain issues with closed factories due to COVID-19 have affected completion times and many of the issues persist as manufacturing struggles to keep up with demand, and attract and retain the workers required.

During the height of the pandemic, we saw the need for rapid deployment of resources to build emergency bed units on very short notice, which required a total integrated project delivery approach. Because of the speed in which it was done and the necessary collaboration, we are starting to see more property owners and project decision makers who want to explore this delivery method on their regular projects, not just emergency.

CPE: What is fueling change in health-care construction?

Richard Simone: Projects that were on hold during the pandemic now need to get online as quickly as possible. As such, clients are considering ways to speed up the process via design assist, design build and/or off-site manufacturing. While these options have been around for a fairly long time, adoption has accelerated due to their proven efficacy during the pandemic.

In terms of COVID-19-influenced design, where possible, hospitals are considering the creation of a mass casualty incident entrance at the emergency department. Basically, adding a third entrance to the ED, in addition to the regular walk-in and ambulance entrances, would allow patients to be quickly triaged and separated, moving infected patients into the MCI/COVID-19 unit.

Also, the redesign of waiting areas has increased to allow for social distancing, more room between chairs, low-height walls with glass separation panels, more compartmentalization and minimal wait times. There are also design changes happening in ways most lay people can’t see, such as catering to the need to add more ability or flexibility to change air flows to decrease the spread of future viruses. Many health-care systems now require larger, more robust, high-efficiency particulate air filtration systems, with MERV 16-level protection which captures more than 95 percent of particles within a specified range.

CPE: What types of health-care facilities are we starting to see more often and why? 

Richard Simone: We are starting to see much more activity for behavioral health facilities. Before the pandemic, there was a great need and after the pandemic there will be an even greater need. Substance abuse has been on the rise since the pandemic, as COVID-19 and post-COVID-19 anxieties are all real issues many people are dealing with. Treating patients with behavioral and mental health needs requires a long-term solution that incorporates brick-and-mortar and telehealth-equipped facilities.

Micro-hospitals—whereby health-care systems are bringing health care closer to its more remote patients in, for example, rural areas—is a rising trend as well.

CPE: Are these impacting main campus hospitals in any way? 

Richard Simone: The rise in micro-hospitals and specialty centers is not impacting main campuses negatively, but rather, they are filling a very important need by supplementing main campus care and reach by providing the support and specialty care that patients need.

CPE: What about telemedicine-influenced spaces? Will these be integrated into construction? 

Richard Simone: We are not seeing a significant increase in telehealth spaces yet, as many facilities are using existing spaces for this purpose. I think specific spaces will need to be designed and built in the future, especially given the fact the 2022 guidelines for design and construction will incorporate specific acoustical treatment requirements for noise reduction, interior noise and speech privacy for telehealth spaces. I believe future design will have to consider telehealth-specific spaces, disbursed throughout the facility, with easy access for doctors and staff.

CPE: What are the infrastructure and operational considerations developers should take into account when building health-care facilities in a post-COVID-19 world?

Richard Simone: Considerations should focus on flexibility, including the ability to quickly change HVAC systems from positive to negative and vice-versa. Developers should also efficiently design in possible surge capacities, which would require the ability to quickly change private patient rooms to semi-private and the option to add more patient beds in urgent cares, ICUs and ED settings.

CPE: What can you tell us about the challenges arising in health-care construction?

Richard Simone: Many health-care systems and facilities suffered a tremendous financial impact over the past 15 months, and as a result, several projects are still on hold. The challenge is getting the systems back to feeling financially stable to get back to planning and building.

CPE: How do you see the sector going forward? 

Richard Simone: We still believe the health-care sector is the strongest market, with the greatest short-term and long-term growth potential. It appears to be rebounding quicker than other sectors. Although not as quick as we hoped, it shows signs of coming back stronger than before.

I believe the government—federal and state—has realized how fragile and out-of-date some of our health-care infrastructures are, and they will make the dollars available for hospitals to expand, upgrade and, in some cases, build replacement hospitals.

CPE: Are there any other trends we should keep an eye on? 

Richard Simone: Not a positive trend, but certainly impactful, is the challenge regarding the shrinking availability of skilled labor, as a large bulk of the workforce is aging and there is a lack of a new generation interested in learning the trade.

 

Source: CPE