Fidelis To Develop Five-Story, 100,000 SF Facility For SCL/Saint Joseph In Denver

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Fidelis Healthcare Partners, a new healthcare real estate venture established by the same leaders who previously built the successful Trammell Crow Company/CBRE Healthcare Services and Development business, has announced its first project.

Fidelis Healthcare Partners has recently finalized an agreement to develop the five-story, 100,000-square-foot Saint Joseph Medical Office Pavilion on the Uptown Denver campus of Saint Joseph Hospital.

Saint Joseph is one of the leading medical campuses in SCL Health, a non-profit, faith-based health system with 11 hospitals in three states. Saint Joseph Hospital’s new $650 million, 375-bed acute care facility opened in late 2014. The campus was rated one of America’s 50 Best Hospitals by Healthgrades in 2017 and 2018.

The new Saint Joseph Medical Office Pavilion will be located on a prominent 1-acre site on the campus at the intersection of Park Avenue, Ogden Street and 18th Avenue. Three floors will be dedicated to Class A medical office space; the ground floor will house convenience retail and restaurant uses; and the rooftop will offer wellness/fitness and entertainment options. The project also includes ground-level, covered parking for physicians and an adjacent parking lot that will offer free parking for patients, visitors and tenant employees.

Kevin O’Neil, president and CEO of Fidelis Healthcare Partners, says he’s often optimistic when competing for new development deals but, as a start-up company, he knew it would be a challenge to be selected through a competitive request for proposals (RFP) process.

“We were up against some strong, established national healthcare real estate development firms, as well as local firms – seven final bidders in all,” says Mr. O’Neil. “I think one reason Saint Joseph selected our firm is because we brought a great deal of thoughtfulness and creativity to our development concept.

“For example, we developed a plan for how to build the best, most complete patient experience on a relatively small urban edge site. We also devised a solution for parking that would meet everyone’s needs while being included in the cost of development, yet still ensuring affordable rent for physicians.”

“We’ve also had the opportunity to work with a variety of executives within the system over the years, and through that earned their trust and confidence that we would deliver great outcomes for the hospital and their doctors,” adds Mark C. Allyn, chief investment officer with Fidelis Healthcare Partners.

Mr. Allyn also notes, “In addition, after its substantial investment in the replacement hospital, Saint Joseph was looking for a developer with efficient capital who was willing to assume financial lease-up risk for the new pavilion. We assured Saint Joseph’s leadership that we had the resources in place together with long term efficient capital and remain dedicated to meeting their needs.”

Fidelis Healthcare Partners recently finalized a joint venture (JV) with a new capital partner: a major state retirement fund advised by Bentall Kennedy, a leading investment management firm and a longtime partner in previous ventures with Mr. O’Neil and Mr. Allyn.

“We clearly conveyed to the Saint Joseph leadership that the Fidelis principals are committed to giving our full attention to their deal,” he says. “When you hire our firm, you’re going to get us – hands-on healthcare experience and partner-level involvement all the way through.”

Saint Joseph hospital officials said the medical pavilion, which is scheduled to be completed in the second quarter of 2020, will fill an important need.

“The Saint Joseph campus is strategically located in central Denver, adjacent to the downtown business district, the River North (RiNo) area and many thriving residential areas,” says Jamie Smith, president of Saint Joseph Hospital. “In addition to the new 375-bed Saint Joseph Hospital, the campus has two medical office buildings totaling about 250,000 square feet. However, the campus has proven to be so popular that there’s a waiting list for space, and our existing medical office buildings are 99 percent leased. The new medical pavilion, with a mix of retail and medical office uses, will be a fantastic addition to our campus. The new space will be a key to our continued growth, which ultimately means more services and value for the growing central Denver community.”

The owner of the medical pavilion will be Fidelis Healthcare Strategic Partners, a joint venture between Fidelis and the previously mentioned state pension fund advised by Bentall Kennedy, and the property manager will be Fidelis Healthcare Partners. The entire Fidelis consultant team is Denver-based and headquartered. This includes: architect Boulder Associates, contractor Saunders Construction and healthcare broker CBRE-Denver Healthcare Services.

Fidelis Healthcare Partners is affiliated with Houston-based Fidelis Realty Partners Ltd., a real estate development firm with the biggest retail footprint in the Houston area and more than $3 billion in retail assets across the Southwestern United States. Fidelis Healthcare Partners was launched in September 2017 and finalized its joint venture agreement with Bentall Kennedy in September.

Mr. O’Neil said the retail expertise of Fidelis Realty Partners will be a significant asset for leasing and managing the street-level and rooftop retail space in the new Saint Joseph Medical Office Pavilion.

 

 

Healthcare REITs Signal An Increased Focus On Medical Office

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It is earnings season, which means real estate companies are diligently releasing their earnings and analysts are intently scrutinizing said reports. Mizuho REITs analyst Richard Anderson covers healthcare REITs and he noticed a trend among the big 3 companies HCP, Welltower and Ventas in their recent releases: they all are emphasizing strategies involving medical office buildings.

To be sure, MOB is a staple among their holdings but as Anderson tells GlobeSt.com, “it just seemed interesting that each of the three highlighted a very specific strategy aimed at approaching the medical office business to some degree, versus past earnings reports.”

He says that:

  • HCP made mention of its joint venture with Morgan Stanley that’s aimed at investing in medical office as well as a new partnership with HCA to focus on the asset class.
  • Welltower is expected to close about $500 million of MOB transactions in the short term. “Also, they have always talked about using their senior housing portfolio as a quasi hanging carrot for medical office, as a medical office feeder.” The REIT has also brought on board a former Duke Realty executive Keith Knokoli, who has strong credentials in the MOB segment. “You don’t make an investment at that level of executive if you’re not serious about the business.”
  • Ventas is re-igniting its exclusivity arrangement with PMB Real Estate Services. It is a medical office developer that Ventas inherited when it merged with Nationwide Health Properties many years ago, Anderson explains. Ventas just re-upped its exclusivity arrangement with the company for the next ten years, he says.

A Lower Risk Profile

What is strange, he says is that “cap rates on medical office assets that are trading hands are still quite low, but nonetheless REITs are maintaining a fair amount of attention toward the space.” Anderson also points out that medical office assets are known for their stability and relatively lackluster growth while skilled nursing is a higher returning asset class that comes with higher risk.

His tentative takeaway: there is possibly a return to risk-off mentality around the corner for healthcare REITs. “Maybe REITs are becoming buyers of medical offices simply because of their low risk orientation, even though the asset class remains quite expensive.”

 

Source:  GlobeSt.

Expansion in DNA Research Is Driving Strong Demand for Life Science Space in the United States

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A growing seniors population and increasing prevalence of high-cost diseases like diabetes has generated a surge in funding for healthcare research in recent years and, along with it, demand for life science-biotech lab space.

But the biggest impact on demand for wet lab space has resulted from mapping of the complete human genome and subsequent advances in biotechnology, according to Ian Anderson, director of research and analysis with real estate services firm CBRE. Anderson notes that the price for sequencing a human genome has dropped from $100,000 to just $1,000, resulting in massive expansion in DNA research and development of new biotech tools, like the CRISPR gene editing system.

“This ‘gold rush’ of information is providing the pharma industry the ability to tailor treatments to individuals and actually cure diseases, not just diagnose them and treat symptoms,” Anderson says.

As a result, lab space vacancy in the top three life science markets—Boston, the San Francisco Bay Area and San Diego—averaged between 4.0 and 6.0 percent at the end of 2017, the most recent period for which data is available, according a report from real estate services firm CBRE. In certain submarkets, including the Bay Area’s Peninsular and Emeryville/Berkley markets, Cambridge, Mass. and San Diego’s Torrey Pines, vacancy ranged between 0 and about 2.5 percent, respectively.

With ongoing high demand, vacancy and upward rent momentum have strengthen even further since the report was released, according to Anderson.

Tight vacancy is generating new construction in the San Francisco Bay Area and Boston-Cambridge markets, as well as growing life science markets, including Chicago and the Raleigh-Durham Research Triangle. San Diego is seeing significant new construction too, as well as redevelopment of office and industrial buildings for life science and biotech research and development.

These three markets have received the lion’s share funding from both the National Institutes of Health (NIH) and venture capital (VC) firms. According to the California Life Sciences Association, the state’s life science and biotech companies were awarded $3.8 billion in NIH grants in 2017 and attracted $6.7 billion in VC investment. The Massachusetts Biotechnology Council reported that Massachusetts life science and biotech companies were awarded $2.7 billion in NIH grants in 2017 and attracted $3.6 billion in VC investment.

“The life science sector is seeing record levels of IPO and funding activity,” says Greg Bisconti, Cushman & Wakefield executive director who heads the company’s life science practice nationally. A third quarter 2018 Cushman & Wakefield report notes that fundraising, IP, and merger and acquisition (M&A) activity are at an all-time, with Big Pharma playing a significant role in M&A and driving significant growth in all major biotech hubs.

The boom in funding has ratcheted up competition for talent and facilities, setting off a “war for talent” among life sciences companies, notes Bisconti.

“There’s a lot of hiring and organic growth of companies, but every company is limited by talent available,” he says. “When building and growing a life sciences company, key talent is being selective about the job opportunity and their future workplace, which highlights that companies need to secure quality space in which to grow talent.”

More patents are coming out of the New York life science cluster than San Francisco and Boston combined, according to John H. Cunningham, executive vice president and New York City regional market director at Alexandria Real Estate Equities. With both U.S. and European life science companies establishing beachheads in the city, Alexandria recently announced plans for expansion of the life science cluster, which is located on 3.5 acres in Manhattan’s Eastside Medical Corridor near New York University’s academic medical center and Bellevue Hospital. The company also acquired two nearby properties that will be redeveloped for its life science and biotech tenants.

The addition of the 550,000-sq.-ft. North Tower will bring total space at the Alexandria Center to approximately 1.3 million sq. ft. The building will provide collaborative space for scientists, as well as start-up space.

The company also acquired the 593,000-sq.-ft. Pfizer building at 219 East 42nd St. and a 177,000-sq.-ft. industrial building in Long Island City, both of which will be redeveloped. “We’re building an ecosystem that will allow growing companies to remain within our platform. People want to stay here with peers because it helps them grow and flourish,” says Cunningham.

CBRE’s Anderson notes that Los Angeles is producing a lot of STEM talent as well, and there is building momentum for a cluster around Harbor-UCLA Medical Center in the South Bay-Torrance area and life science and biotech companies located around UCLA and in the San Fernando Valley and Thousand Oaks areas. For now, however, many life science and biotech tenants want to be close to where collaboration and scientific breakthroughs are happening (San Francisco Bay Area, Boston-Cambridge or San Diego), Anderson notes.

 

Source:  NREI