Where Medical Office Acquisition Opportunities Are

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Healthcare real estate in the US is in a state of absorption and expansion, as networks and organizations battle it out to claim the best practices and locations.

There is flux within the sphere, reported NAI Global last week, with medical REITs among the most active buyers in 2021, looking for product and paying big numbers.

One acquisition opportunity are point-of-access clinics, located within diverse communities. Another increasingly popular acquisition target are independent specialty practices—regardless of size—which are being absorbed by large systems. Meanwhile, other clinics are looking to break away, creating real estate disposition opportunities.

Buyers And Sellers In State of War

Additionally, off-campus, multi-specialty clinics and ambulatory surgical centers are seeking strategic locations for expansion and geographic reach, representing more opportunities. The current and foreseeable climate is one of “war,” according to one commentator to NAI Global, as firms compete for market share and dominance.

Medical office buildings have been incredibly stable throughout the pandemic with occupancy rates remaining unchanged and asking rates increasing. Their stability compared to other classes continues to draw interest from investors who see it as a “safe” investment despite construction costs increasing in 2021.

Finding Historically Low Cap Rates

Fully leased MOBs with credit tenants are expected to continue to trade at historically low cap rates in 2022. Large institutional owners have maintained their rentals, concession packages, and the like, while local landlords with mixed tenant profiles are more willing to offer competitive lease packages and incentives to attract and secure medical tenants.

The sector does face specific challenges though, NAI Global also says. Staffing shortages, including burnout of healthcare workers, will continue in 2022, resulting in pressure to both provide care and remain profitable. Additionally, costs for care will outpace inflation, as the overwhelming demand requires additional expenses.

 

Source: GlobeSt.

NorthWest Healthcare Properties REIT Debuts In U.S. With $765M Portfolio Acquisition

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NorthWest Healthcare Properties REIT has made its debut in the U.S. market with a $765-million portfolio acquisition, expected to close in Q2 2022.

The portfolio is comprised of 27 health care properties including seven hospitals, five micro-hospitals, and 15 medical office buildings totaling 1.2 million square feet. It is 97 percent occupied, with a weighted average lease expiry of 10.7 years and is geographically diversified across 10 states with approximately 60 per cent of net operating income coming from top 20 U.S. metropolitan statistical areas with a focus in the Greater Chicago Area and Sunbelt States.

The U.S. Acquisition

The portfolio includes 78 per cent of single-tenant, 22 per cent multi-tenant properties and 91 per cent of net operating income is either triple or quadruple net.The portfolio’s acquisition will initially be funded from a combination of new corporate and property level financing as well as the REIT’s existing resources.

“The U.S. portfolio is an excellent starting point to launch the REIT’s U.S. strategy because of the defensive nature of the portfolio’s long-term cash flows, attractive contractual rent growth and low management intensity; all of which aligns strongly with the REIT’s core investment strategy,” CEO Paul Dalla Lana said in a media release. “Moreover, this portfolio is a launching pad for accretive expansion with U.S. pricing typically approximately 100 basis points higher on a cap rate basis than the REIT’s other global markets with transaction volume that is unmatched globally.”

The 18 states in the Sunbelt area include Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Kansas, Louisiana, Mississippi, North Carolina, New Mexico, Nevada, Oklahoma, South Carolina, Tennessee, Texas and Utah.

“One of the attractions for the REIT was that it is highly diversified by both market operators and asset types,” said Dalla Lana.

The current plan for the REIT is to bring an investment partner into the portfolio by the end of 2022, although Dalla Lana did not disclose details on this or on the origin of the U.S. portfolio, only that it was an “institutional vendor.”

“Clearly the U.S. is the largest health care and health care real estate market in the world,” Dalla Lana said during a conference call. “So there’s a very significant opportunity to happening and we’ve been working hard over the last year to identify that.”

At the time of writing, there is “nothing major” planned in terms of further transactions on the portfolio.

Other Reports And Looking Ahead

Thanks to the planned completion of a U.K. joint venture, its planned U.S. portfolio and global health care precinct initiatives, all of which are expected to close later in 2022, the REIT’s total assets under management plus capital commitments are expected to increase to approximately $20 billion in the near-term.

Its Q4 2021 revenue was stable year-over-year at $96.4 million. Another expansion of its portfolio came with the $153.3 million acquisition of Cheshire Hospital – a 50 bed acute care hospital occupied by the Spire Hospital Group, the U.K.’s third-largest private hospital operator.

Further expansions included the Tennyson Centre acquired by Vital Trust Healthcare, its New Zealand subsidiary, for approximately $83.9 million and the Epworth Geelong & Elim Hospitals acquired by the REIT’s Australian institutional joint venture for approximately $124.2 million.

On the increased geopolitical risk driven by the Russia-Ukraine conflict, Dalla Lana stated: “Despite the organization’s exposure to European markets, the impact of this point has been limited with credit and equity markets open and accessible and no evidence of disruption in acquisition markets.”

Founded in 2004 and publicly traded since 2010, Toronto-headquartered NorthWest Healthcare Properties REIT has focused on health care real estate investment and management. This translates to 192 properties, approximately 15.3 million square feet and about 2,047 tenants in 7 countries.

Vital Trust Healthcare has assets of over $11 billion, also released its fourth-quarter results last month.

 

Source: Real Estate News Exchange

New Medical Office Building Is On The Way In Frisco

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Dallas-based medical property firm Caddis Partners is building an office building in Frisco.

The 60,000-square-foot Frisco Medical Pavilion II will be located at 12950 Dallas Parkway near Texas Health Frisco hospital. Construction is set to start midyear with an opening in the summer of 2023. Transwestern Real Estate Services is marketing the project to medical tenants.

“Building on the success of our Frisco Medical Pavilion development, which broke ground in 2018 and is now 100% leased, we are excited to begin the development of Frisco Medical Pavilion II in the fast-growing Frisco, Texas, market,” Caddis’ W. Todd Jensen said in a statement.

The medical office building will include space for a potential ambulatory surgical center on the first floor.

“Built with both the physician and patient in mind, Frisco Medical Pavilion II is an excellent opportunity for specialty medical practices seeking Class A space in one of the fastest-growing submarkets in the United States,” Transwestern’s Brooke Sutherland said.

Caddis oversees a portfolio of more than 70 properties across 16 states with almost 5 million square feet. Caddis has offices in Dallas, Atlanta, Phoenix, Houston and Washington, D.C.

 

Source: The Dallas Morning News