Related Cos. Buying Stake In CareMax To Develop Senior Health Centers

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Related Companies is acquiring up to a 9 percent stake in Miami-based health care provider CareMax, with plans to develop about 75 senior health centers in underserved areas nationwide.

Related bought $5 million of CareMax stock, at a price of $10 per share as part of the agreement, and will serve as an investor, advisor, developer, and even as landlord of CareMax health centers, The Wall Street Journal first reported. CareMax or its affiliates will operate the new facilities, according to a press release.

“Quality healthcare is essential for all communities to thrive,”Bryan Cho, executive vice president of Related Companies, said in a statement. “We chose CareMax to help expand their reach because their fully integrated model is uniquely positioned to address the systemic issue many low-income seniors face.”

Cho will join the CareMax board of directors as part of the deal.

The Hudson Yards developer also received warrants to purchase up to 8 million additional shares at $11.50 per share, which can be exercised based on when the new medical centers that Related helped create are opened, according to the release.

“CareMax serves 65,000 people with its 42 Florida medical centers — about 22,000 of which are seniors — and will use the investment to expand its centers into Texas, Tennessee, New York and other states,” Ben Quirk, chief strategy officer at CareMax, said in a statement to Commercial Observer.

Three initial facilities have plans to open in 2022: a 8,000-square-foot spot at 651 River Avenue in the Bronx Terminal Market; a 5,000-square-foot outpost at 17-31 Seagirt Boulevard in Ocean Park Apartments in Far Rockaway, Queens; and a 27,000-square-foot spot on 1915 3rd Avenue in East Harlem, Quirk said. The leases are long term, though Quirk would not comment further on the terms.

The Miami health care company, founded in 2011, plans to open a total of 75 new centers in the next three years. Its residents pay monthly subscriptions through Medicaid and Medicare for health care, rather than fees based on individual office, clinic and hospital visits, per WSJ.

Related Companies, which got its start as an affordable housing developer after its founding in 1972, pointed to a growing need to serve affordable housing residents, who tend to age where they are rather than move, according to WSJ. The landlord, which owns 60,000 affordable housing units in 24 states, views health centers as a source of demand for flagging downtown retail spaces.

“Together with Related we saw that there is a profound nationwide need for medical and social care within and convenient to affordable housing communities,” Carlos de Solo, president and CEO of CareMax, said in a statement. “We engaged Related as our real estate advisors to assist us in locating our de novo medical centers directly within and near to these affordable senior communities nationwide.”

 

Source: Commercial Observer

Suburban Medical Office Pricing Is At A Premium

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As investors moved toward real estate sectors with better growth opportunities, they turned towards the medical office sector.

Now pricing is at a premium relative to suburban offices, according to an analysis by Real Capital Analytics.

From Q1 2016 to Q1 2021, medical office cap rates averaged 20 basis points (bps) lower than suburban offices. However, in Q1 2021, that spread increased 25 bps, as medical office properties had a 6.5% cap rate across the US.

Suburban office and medical office haven’t always diverged. For example, from 2002 to 2015, there was no discernable spread between cap rates for suburban offices and medical office buildings, according to RCA.

Not surprisingly, prices for medical offices have also held up better than suburban offices through the pandemic. While RCA CPPI for suburban offices declined at a 0.7% year-over-year pace into Q3 2020, it posted a 2.7% pace of growth into Q1 2021.

For medical offices, the volatility wasn’t as great. The RCA CPPI for medical offices hit a low of 2.5% annual growth into Q3 2020 but stood at a 2.8% pace by Q1 2021.

“The investors have been more optimistic about the medical office sector, understanding that an aging population requires more medical intervention,” according to RCA’s Jim Costello.

Medical office deal volume was also more robust through the pandemic. In Q1 2020, medical office deal volume fell only 41% year-over-year. By comparison, suburban offices suffered a 64% decline.

While suburban office may not fare as well against medical office, it has outperformed urban office. Its growth accelerated to a 3.6% annual pace in March, while urban assets declined by 2.4% year-over-year, reflecting a continuing trend of suburban outperformance in the sector, according to a separate analysis from Real Capital Analytics.

 

Source: GlobeSt

Unprecedented Growth Projected In Outpatient Care In The Next 10 Years

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The U.S. population is projected to grow by 22.5 million people, or just shy of 7%, between 2020 and 2030.

Remarkably, three-quarters of the population growth, or 17 million people, is in the 65 years or older cohort. Nearly 4 of 5 healthcare expenditure dollars is spent by this older group. With the aging population increasing from 17% of the U.S. population in 2020 to 21% of the U.S. population in 2030, medical encounters will be on a rapid rise.

Forecasted growth in patient care volumes between 2020 and 2030, however, show divergent trends between inpatient and outpatient utilization. Inpatient admissions are expected to decline in absolute number from 34.9 million stays to 34.6 stays, or a drop of 0.9% in this 10-year period.

Outpatient care stands in sharp contrast with estimated growth of more than 20%, representing an added 540 million annual outpatient visits over the 10 year period. In 2030, outpatient encounters are expected to top more than 3.2 billion serving the expected U.S. population of 355 million individuals in 2030, or 9 visits per individual a year.

The trend towards outpatient care and away from hospital stays is a decades-long shift. Today, more than 50% of health system revenue comes from outpatient visits, a radical change from hospital-centric care to patient-centric care. In the past 20 years, inpatient admissions per 1,000 population dropped from 120 to 103, a reduction of 14%. During the same time, outpatient visits per capita grew 26%.

Advances in technology and medicine have enabled care to grow and thrive outside the acute care facility, a trend that has been accompanied by better healthcare outcomes, lower mortality and greater patient safety. Outpatient care has fueled the growth of medical office buildings, both on campus and in the community, supporting the shift to the “patient-centric” mode of healthcare delivery.

The pandemic in 2020 and 2021 put a spotlight on the jeopardy with delivery of U.S. outpatient care in an acute care setting. Thus, the healthcare crisis accelerated the trends in increased care in locations such as urgent care centers, ambulatory surgery centers and other outpatient medical buildings. At the same time, telehealth exploded in use during the pandemic given the obstacles to safe visits at the height of the crisis. Telehealth visits grew from 1% of outpatient encounters pre-pandemic to 12.5% at the peak in April 2020 to 6% today with widely varying utilization by medical specialties.

The aging and growing U.S. population and the overarching trend towards outpatient care is strongly supportive of increased demand for healthcare real estate and for the growing clinical intensity and value of medical office buildings of the future. Quality buildings occupied by major healthcare providers serving patients with greater and more acute services means durable, long-term occupancy with growth in revenue that can support the operating costs associated with occupancy. Medical real estate is expected to grow and perform in the same resilient manner in the future which will be positive for the owners of the properties.

Recent Activity – New Listing – Investment Sale

Central Illinois MOB Portfolio – 321,355 s.f. – Decatur and Peoria, IL
Closed – Debt Placement

Hoag Health Center – MOBs & Urgent Care – 159,235 s.f. – Irvine, CA
Closed – Debt Placement

114 Pacifica Court – 110,392 s.f. – Irvine, CA
Closed – Investment Sale

Brookfield Commons – 91,186 s.f. – Richmond, VA
Closed – Investment Sale

Omega Medical Center – 77,511 s.f. – Rockville, MD
Closed – Equity Placement

Thomas Park Investments – 55,608 s.f. – Haverhill, MA
Closed – Debt Placement

Oakwood Medical Park – 36,419 s.f. – Round Rock, TX
Closed – Investment Sale

Fertility Centers of Illinois – 30,264 s.f. – Glenview, IL

 

Source: HREI