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Office Properties Income Trust To Merge With Diversified Healthcare

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Citing a “challenging backdrop for traditional office assets,” Office Properties Income Trust has entered into a definitive merger with Diversified Healthcare Trust, a REIT that owns medical office buildings, life science properties and senior housing facilities, in an all-share transaction that values the combined company at $12.4 billion.

The combined company would have 539 properties in 40 states and Washington, D.C. Between $2 million and $3 million in cost savings and synergies annually are expected once the merger is completed.

Both REITs are managed by The RMR Group, an alternative asset management firm based in Newton, Mass. The merger would need to be approved by OPI and DHC shareholders. It is expected to close in the third quarter. OPI has secured a commitment from JPMorgan Chase Bank, NA for a $368 million bridge loan to help finance the transaction.

OPI would be the surviving entity in the merger and would be led by the OPI executive team and managed by The RMR Group. The REIT expects to change its name to Diversified Properties Trust upon closing. It would continue to trade on the Nasdaq Stock Exchange. OPI shareholders would own 58 percent of the combined company and DHC shareholders would own approximately 42 percent.

As of Dec. 31, OPI owned and leased 160 properties with approximately 21 million square feet in 30 states and Washington, D.C. Approximately 63 percent of its revenues were from investment grade rated tenants.

As of Dec. 31, DHC’s portfolio was valued at about $7.1 billion and included 379 properties in 36 states and Washington, D.C., occupied by approximately 500 tenants. The portfolio totals about 9 million square feet of life science and medical office properties and more than 27,000 senior living units. One of DHC’s life science properties, Muse at Torrey Pines in San Diego, underwent a $100 million redevelopment two years ago. The three-building property now has 186,000 square feet of collaborative office and flexible laboratory space and improved indoor and outdoor amenities.

Benefits Outlined

Christopher Bilotto, OPI’s president & chief operating officer, said in a prepared statement the merger would establish the combined company as a larger, more diversified REIT that is better positioned for long-term growth and value creation for OPI shareholders. He described the DHC holdings as attractive health-care real estate assets that have a work-from-home resistant tenant base and private pay senior living communities that are expected to continue to recover following the pandemic and have favorable long-term demographics.

Bilotto said the merger would give OPI access to stabilized cash flows and NOI growth potential from the senior housing portfolio. OPI would also benefit from additional capital sources, including Fannie Mae and Freddie Mac. He stated the merger should create a stronger and more resilient combined company, with more diversified revenue sources and decreased exposure to a weakening office market environment.

The merger will also help DHC strategically and financially, according to Jennifer Francis, DHC’s president & CEO. DHC has $700 million of debt coming due by mid-2024 and is currently not in compliance with its debt covenants. Francis said in prepared remarks the combined company would be in immediate compliance upon closing and also have immediate access to multiple capital sources which would address the upcoming debt maturities and increase liquidity to continue funding its senior housing operating portfolio and capital improvement plan.

Transaction Advisors

BofA Securities is acting as exclusive financial advisor to DHC. Sullivan & Cromwell LLP is the legal advisor to the special committee of DHC’s Board of Trustees.

J.P. Morgan Securities LLC is acting as exclusive financial advisors to OPI. Wachtell, Lipton, Rosen & Katz is the legal advisor to the special committee of OPI’s Board of Trustees.

 

Source: Commercial Property Executive

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The Year’s Biggest MOB Deal Could Be A Foreclosure

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Although Ventas did not delineate the MOBs that are included, a search of the RevistaMed database found that Santerre is listed as the owner of about 100 properties. The largest is the 169,000 square foot Elm Plaza at 908 N. Elm St. in Hinsdale, Ill. (PHOTO CREDIT: OfficeSpace.com.)

Most healthcare real estate (HRE) professionals seem to agree that, primarily due to higher interest rates, 2023 medical office building (MOB) sales volume will pale in comparison to recent years.

So the recent announcement that an 88-asset MOB portfolio is about to change hands is big news – and could very well end up being the year’s largest transaction. But, ironically, higher interest rates are exactly what are driving the deal.

Chicago-based Ventas Inc., the nation’s second largest healthcare real estate investment trust, announced on March 31st that it intends to foreclose on a large HRE portfolio that was put up as collateral for a 2019 loan.

 

Source: HREI

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Methodist Celina Medical Center Breaks Ground In North Texas

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Celina’s first hospital is officially on its way to becoming a reality.

On Tuesday, April 4, Celina and Methodist Health Systems officials gathered for a ceremonial groundbreaking at the site of a future hospital complex that will include a five-story hospital, a medical office building and healthcare services to one of fastest-growing cities in the area.

“I know that we’re surrounded by dirt right now, but our construction teams will be carving out more than 520,000 square feet of parking lots, roads and sidewalks that are needed to build this beautiful hospital that brings hope, healing and pride to this world-class community,” said Pam Stoyanoff, president and chief operating officer of Methodist Health System.

There were multiple hints of Celina’s identity at the groundbreaking, which featured hay bales painted in Celina orange and Methodist Health Systems blue, performances by the Celina High School Choir, a welcome from Celina ISD cheerleaders and a video highlighting the city’s history as a “Rollertown.”

Rendering Credit: Methodist Health System

The ceremony for Methodist Celina Medical Center also included hints to Celina’s future, featuring displayed renderings of the facility that is slated to serve patients from around the area, including Collin and Denton counties.The facility is a $200 million project over 46 acres that is expected to take two years to build.

A groundbreaking ceremony was originally scheduled for Jan. 31 but was postponed due to inclement winter weather. At the time, Stoyanoff told the Celina Record that construction would not be held up and that work had already begun on the site.

The April 4 event served as a chance to officially celebrate the beginning of construction on the site, located at the southeast corner of Dallas North Tollway and FM 428.

“Driving growth to this booming part of North Texas is a big part of the strategic plan developed by our board,” said Randall Canedy, chairman of the Methodist Health System Board of Directors. “We know this town is just going to keep growing. That’s why our plans for the hospital include shell space for future expansion. In addition to the hospital itself, we will be putting up professional office buildings for our physicians to work in, and soon we look forward to adding more family health centers in and around Celina to take care of you and your families.”

The new hospital is slated to open in 2025 and will host a variety of services, including cardiovascular care, cancer care, women’s services, orthopedics and robotic surgery, according to a press release. It will also include 30 medical-surgical beds, 10 post-partum beds, eight intensive care unit beds and 12 emergency department beds. It will also include three operating rooms, a daVinci surgical robot, and shell space for an additional operating room, as well as a cardiac catheterization lab and two procedure rooms.

 

Source: Celina Record