Healthcare Real Estate Execs Foresee A Big Year For Medical Office Buildings

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For the past several years, professionals involved in the medical office building (MOB) sector have been saying that, aside from an economic downturn or total transformation of the healthcare system, there is just one thing that could slow the growth and success of the product type: a black swan event.

Well, from a business and economic perspective, the COVID-19 pandemic is the very definition of a black swan: an extremely rare, unanticipated event that caused widespread and catastrophic economic damage.

However, not only has the MOB product type survived seemingly unscathed, but it has thrived and even become a more desirable investment property type among an ever-growing pool of capital sources.

“As we’ve now seen going through a … few black swan events, I mean, these are resilient asset classes,” said Christopher Merrill, chairman and CEO of Chicago-based Harrison Street, a real estate investment firm he co-founded in 2005 and which has more than $32 billion of assets under management, with a strong focus on healthcare.

 

Source: HREI

Surgery Partners Plans To Acquire $400M Worth Of Properties On 2021 And Five Other Insights

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Nashville, Tenn.-based Surgery Partners reported $1.9 billion in 2020 revenue but still posted a net loss of $155.6 million on the year.

Company leaders discussed performance in an earnings call transcribed by The Motley Fool on March 10.

Wayne DeVeydt, executive chair of the board, on how Surgery Partners has changed in response to COVID-19: “Our business model was pressure-tested in 2020 and has proven to be resilient. Our results in this challenging environment give us confidence that the company we built should support sustainable, long-term double-digit growth in 2021 and beyond.”

Mr. DeVeydt on the growth of total joint replacements: “Joint replacements in our ASCs were up 110 percent as compared to the prior year quarter and for the year. Even with the disruption of COVID, joint replacements in our ASCs have increased by approximately 96 percent.”

Mr. DeVeydt on Surgery Partners’ goals in 2021: “In 2021, we are now ready to move on the offensive and capitalize on the $150 billion total addressable market that we believe we are uniquely positioned to capture. … This dry powder gives us the ability to aggressively pursue our growth agenda, while maintaining our disciplined approach to capital deployment that [CEO Eric Evans] will speak to in more detail.”

Mr. Evans on physician recruitment: “Year to date, we’ve recruited over 560 new physicians who generated 15 percent more revenue per case as compared to the 2019 cohort. But, the success of our recruiting program is not just a function of our most recent additions.”

Mr. Evans on the specialties Surgery Partners is targeting for success: “Over multiple years, we have also been making investments in expanding our musculoskeletal footprint and more recently in expanding our presence in cardiology, as we think about longer-term opportunities. We have invested in these areas because of their large and growing addressable markets. Specifically, we estimate that there is over $60 billion of cases that will shift from inpatient to outpatient over the next several years. And, we estimate that over 60 percent of those procedures are in musculoskeletal and cardiology.”

Mr. Evans on acquisitions: “We believe we are in a strong position to further expand our portfolio in 2021, and we have the financial capacity to execute on over $400 million of transactions. … We believe that the pandemic has fundamentally changed the way patients, surgeons and health plans will think about the role that purpose-built short-stay surgical facilities will play in healthcare delivery, which continues to drive the shift of surgeries to our facilities. This has been our company’s differentiation strategy and now more than ever, our value proposition is resonating with key stakeholders in the healthcare environment. We remain very confident in our long-term organic growth model and believe that scaled independent operators, such as Surgery Partners, are uniquely positioned to grow in this new marketplace.”

 

Source: Becker’s ASC Review

Total MOB Sales Volume Tops $11 Billion In 2020

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In late January, Arnold, Md.-based Revista, a research firm focused on providing a wide variety of healthcare real estate (HRE) data to its subscribers, reported that medical office building (MOB) sales had “preliminarily” totaled $10.2 billion in 2020.

The reason for the “preliminary” tag was that Revista was presenting the data just a few weeks after the end of 2020, not giving it enough time to track down all of the sales that took place, including a flurry of transactions that totaled well over $600 million in the last few days of the year.

In presenting the $10.2 billion sales figure, as well as many other statistics, Jan. 26 during Revista’s first of six planned informational webcasts planned for 2021, Hilda Flower Martin, a principal, said “There are still more (transactions) coming in, so this ($10.2 billion figure) is definitely going to be revised upward. I wouldn’t be surprised if it doesn’t get close to or surpass $11 billion, which is right in line with what we’re typically seeing (in recent years) in the sector.”

Ms. Martin’s prediction was indeed correct, as Revista recently released its final MOB sales statistics for 2020.

 

Source: HREI