Rival REITs To Combine Into $11B Medical Office Giant

Healthcare Trust of America and Healthcare Realty Trust agreed to merge on Monday, Feb. 28th, into a combined pure-play medical office building REIT that will have a pro forma equity market capitalization of approximately $11.6B.

The merged company would be based in Nashville, with additional corporate offices in Scottsdale and Charleston.

The original version of this story is below:

Two major healthcare property owners are on the verge of a merger.

Healthcare Trust of America is well along in talks to merge with Healthcare Realty Trust, The Wall Street Journal reports, citing anonymous sources. A combination of the two in a cash-and-stock deal would create a $10B healthcare property entity.

Both REITs own and operate medical office buildings nationwide. Healthcare Trust of America owns about 25M SF of such properties, and Nashville-based Healthcare Realty Trust has about 18M SF.

Scottsdale, Arizona-based HTA has been under activist investor pressure to sell. In October, Elliott Investment Management sent an open letter to the company urging it to go on the market, arguing that the REIT has underperformed.

HTA stock ticked up on Friday about 1.5% after word of the possible merger broke. Over the last year, its stock has gained about 10%, but over the last five years, its stock has dropped roughly 5%.

“We are actively evaluating a number of alternatives, including, among others, a corporate sale or merger, joint ventures and partnerships or asset sales,” HTA Chairman Brad Blair said in November during the company’s Q3 2021 earnings call.

REIT mergers have been at record levels lately. Transactions between REITs totaled $108B through the first three quarters of 2021, setting an all-time annual record even before the fourth quarter was tabulated, according to JLL data. During 2020, the total was only $17B, well off the more recent high of $83B in 2018. The previous all-time REIT M&A record for a year was $103B in 2006.

 

Source: Bisnow

8-Property Fresenius Medical Care Portfolio Trades Hands For $56.5 Million

An undisclosed buyer has acquired an eight-property single-tenant healthcare portfolio from Kingsbarn Realty Capital for $56.5 million.

Fresenius Medical Care occupies all eight of the properties, and the average remaining lease term is 10.4 years on the original 15-year leases. The eight properties total 94,000 square feet and are located in Texas, Virginia, New York, Ohio, Georgia, and Missouri.

Fresenius-occupied properties have been popular among single-tenant net lease investors. According to The Boulder Group’s Third Quarter Net Lease Research Report in 2021, Fresenius was among the single-tenant properties to experience the greatest amount of cap rate compression for new construction properties. 7-Eleven and AutoZone were also on the list. Overall, cap rates for retail, office and industrial fell to 5.80%, 6.80% and 6.70%, respectively, and pricing in the sector is at all-time highs.

SRS’ national net lease group managing principals Matthew Mousavi and Patrick Luther and first VP Stephen Sullivan brokered the eight-property sale, representing Kingsbarn, as well as 14 other Fresenius-occupied properties since September 2021.

Mousavi says that the deals show the strong investor appetite for healthcare real estate, which he expects to continue.

“We see this trend continuing due to continued demographic changes with an aging population, the appeal of medical as an e-commerce resistant product type, and the fact that these operators tend to be well capitalized with strong financial positions—allowing for a more efficient sale to the marketplace as well as the availability of attractive financing for investors,” Mousavi said in a statement about the sale.

Other deals involving Fresenius include White Oak Healthcare MOB REIT’s acquisition of a seven-property medical office portfolio last year. The seven assets are 100% leased by Fresenius and DaVita affiliates. They total 67,110 square feet and are located in five states.

Medical office deals have become so popular that some office owners are trying to sell office properties with any medical tenants as medical office to capture better pricing and more investor interest. Some properties with as little as 25% medical office are being marketed as healthcare, according to Jon Boyajian, a principal at Echo Real Estate Capital, a medical office expert. However, investors should be cautious. Converting office into medical is no easy task.

 

Source: GlobeSt.

Why Amazon and Bank of America Are Supporting Parkland’s RedBird Health Center

By almost any measure, southern Dallas is medically underserved, resulting in worse health outcomes Measurements of life expectancy, diabetes, asthma, insurance rates, and even COVID-19 outcomes are all lower for communities south of I-30.

The development of Parkland Health’s RedBird Health Center will be joining the fight against health disparity and has two massive allies in Amazon and Bank of America. The lack of insurance and quality healthcare options mean that Parkland Hospital’s emergency room is often inundated with patients whose issues could be solved in an urgent care or primary care clinic.

Parkland has the busiest emergency department in the country, serving 750 patients a day, often addressing symptoms of chronic health issues suffered by residents of southern Dallas county, where many households are at or below 200 percent of the federal poverty level. All this means that one of the best predictors of success, chronic disease, and life expectancy is one’s ZIP code, a troubling notion to the next generation.

A crowded emergency room is compounded by a lack of providers in southern Dallas, transportation hurdles, a need for child care, and other obstacles for a population that has been neglected for generations. The RedBird Health Center will provide access to needed services closer to home as part of the mixed-use development Reimagine RedBird. The center will be offering adult and geriatric primary and women specialty care, behavioral health for all ages, pharmacy, social work, and other services.

While most of what Parkland does is publicly funded, private philanthropy has significantly impacted the health center’s final version. That’s where Parkland Foundation Michael Horne comes in. A former charter school principal who started a KIPP Campus across the street from RedBird, Horne’s passion for the community and ability to advocate for its advancement have allowed him to secure critical partnerships. He wanted the foundation to be a part of what was happening and grow existing partnerships and add new ones But it isn’t as easy as asking for a blank check from Amazon or Bank of America. The conversations needed to be centered around a particular need that appealed to both sides of the equation.

Seeking the advice of community leaders and clinicians, the foundation found cancer identification as a key area to keep patients from arriving at the ER with stage III and IV cancer symptoms. Horne found a private donor to give $1.5 million toward mammography services and found willing partners in some of the nation’s largest companies. Using tools like Parkland’s Community Health Needs Assessment, Horne can tell a story to connect partners to the reality of health disparity in Dallas, looking for common ground.

“Companies have a series of pillars they want to promote from a corporate social responsibility standpoint,” Horne says. “I download that information and look for any kind of connective tissue between where they are globally and how they want to invest their billions of dollars and what they want to do in Dallas.”

In Amazon’s first partnership with the community health worker program, the company contributed $150,000 toward a community health worker program in the area. Amazon’s philanthropy is wide-ranging and worldwide, and the company was swayed by the data about uninsured rates in Dallas and felt like community health workers would be a targeted way to address a need. These workers would develop relationships in the community to educate and build trust, helping people identify and manage the disease and chronic conditions before they become emergencies. The workers would allow community members to utilize RedBird earlier and more often, identifying and addressing problems along the way.

“It’s all about community outreach and education around chronic health conditions, but it’s peer-to-peer, so the public health workers live in the community,” says Vickie Yakunin, Amazon’s external affairs lead in North Texas who met Horne while they were in the Leadership Dallas cohort. “That’s what builds trust between the community this new health clinic that opened up in the community.”

Bank of America has been a longtime booster of Parkland, and their $1 million anchor grant is meant to address the disparity in Southern Dallas. The gift will be used to bolster preventative and primary care services. Quality healthcare is essential for achieving upward economic mobility, which is one of BoA’s focus areas. When residents are consistently plugged into the health system, they are more likely to adhere to medications, avoid the hospital, and improve outcomes.

“The research highlighting the needs of specific ZIP codes in southern Dallas was impactful for BoA,” says Jennifer Chandler, the Head of Philanthropic Solutions for Bank of America and Dallas Market President. “If you look at the data, the transportation challenges, and the fact that they can help solve for that in an efficient way through the community, that was a standout for us.”

RedBird Health center wants to be a place in and of the community, offering connectivity to healthcare that doesn’t exist in large swaths of the city. The facility will balance quality services with education, outreach, and community involvement. Without the latter, the former won’t be accessed.

“Let’s teach you how to be stewards of your health, empower you with information that you want, and then we have a space you can come back to as your medical home,” Horne says.

 

Source: D CEO Magazine