houston_canstockphoto23149179 800x533

5 Of The 20 Largest Medical Office Deliveries Expected This Year Are In One City

/in , , /by

A new report indicates Houston’s medical office market absorbed almost 40K SF in Q1, and more growth is coming, with the city poised to be home to five of the 20 largest medical office projects set to deliver this year across the nation.

Overall medical office leasing increased 26.4% year-over-year, according to JLL’s Medical Office Building Insight report that was just released. Additions to the market include the Hope Health Clinic’s 70K SF flagship location in Sugar Land and Orion Medical Group’s 47K SF building in Clear Lake.

Another 606K SF is under construction, according to the JLL report. Q2 is set to bring the delivery of the largest medical office building project in the country this year, per 42Floors.

A 400K SF, $1.3B project is the O’Quinn Medical Tower at the McNair Campus of Baylor St. Luke’s Medical Center, Houston Innovation Map reported. The 12-story building will include an ambulatory surgical center with 12 operating rooms and 10 endoscopy suites, an 80-bay setup for infusion therapy, more than 70 exam rooms and more than 850 parking spaces, the article states.

Four other Houston projects made 42Floor’s national top 20 list. Two of them are Kelsey-Seybold projects slated to deliver in Q3: a 158K SF center on the North Grand Parkway and a 116K SF ambulatory surgical center in Clear Lake. The other two projects listed are the 159K SF Houston Methodist Sugar Land Hospital Medical Office Building 4 and the 107K SF 1715 Project in Friendswood.

Houston offers the highest concentration of medical office building projects of any metro on the 42Floors list. That designation comes as healthcare systems like Houston Methodist and Memorial Hermann continue to expand their operations to match population increases, leading to sustained growth in the medical office market, JLL’s report states.

Other trends seen in Q1 include the popularity of Class-A medical office space, reflecting the flight to quality seen across the entire office sector. The absorption for Class-A medical office totaled about 50K SF while Class-B’s was -10K SF, balancing out to the nearly 40K SF total absorption.

Sugar Land and Clear Lake continue to show themselves as strong suburban markets for the medical office building market development, totaling over 2M SF and 1.75M SF of inventory, respectively.

The Woodlands, which is looking to become a hub for the life sciences industry, has 2.52M SF of medical office building inventory, according to the JLL report.

“Houston’s medical industry is propping up its potential to draw life sciences business,” Matt Gardner, leader of CBRE’s Americas life sciences advisory group, told Bisnow. “For decades, the pieces have been there. I think the sense around the world in the industry is that it’s starting to come together now. And it’s starting to show up for more of the growth that we’ve been hoping for for a long time.”

 

Source: Bisnow

q1 on post it note with graphs and charts_canstockphoto84101914 800x533

Medical Office Building Mergers, Acquisitions Up 14% In First Quarter 2023

/in , /by

Medical office building mergers and acquisitions were up 13.7 percent in the first quarter of 2023 and up 5 percent from the same period last year.

Medical office building spending increased by 21.3 percent over the last quarter, hitting $991 million in the first quarter, according to an April 14 press release.

The largest medical office building sale with a disclosed price in the first quarter was for $190 million.

Tennessee saw the highest number of mergers and acquisitions in quarter one with 11 deals, followed by California, Illinois, Florida and Texas.

Montecito Medical was the busiest acquirer in the market, obtaining 261,307 square feet of property across the country. The real estate investment firm’s most expensive transaction of the quarter reached $48 million.

 

Source: Becker’s ASC Review

businessmen holding blocks_canstockphoto32110851 800x533

Office Properties Income Trust To Merge With Diversified Healthcare

/in /by

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