Medical Office Building Sales Fell Nearly 50 Percent In Q2, But The Sector’s Outlook Is Strong

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The volume of MOB investment sales transactions in the second quarter of 2020 totaled around $2.2 billion, a 43 percent decrease compared to a year ago. In the first quarter of 2020, MOB investment sales volume reached $3.7 billion, according to data firm Real Capital Analytics (RCA).

The CoStar Group, another provider of commercial real estate data, pegs MOB investment sales volume at around $2.1 billion in the second quarter, a drop of 54 percent from $4.7 billion from a year ago.

“The volume of sales has absolutely hit pause, it hit the brakes really hard in the second quarter. You saw a significant drop in sales volume,” says Keith Pierce, research manager for Southeastern region with real estate services firm Transwestern. “The price per square foot did not really shift that much for those sales that did close. But by and large, just everybody froze in late March and largely stayed frozen until sometime in June.”

Average cap rates on transactions involving MOB assets remained at 6.6 percent at the end of the second quarter, flat with the figure from a year ago and the first quarter of 2020, according to RCA. CoStar pegs average MOB cap rates at 6.7 percent, also registering no change from the previous quarter.

“I anticipate seeing somewhat of a flattening,” says Russell Brenner, president of the medical office and life sciences division with real estate investment firm CA. “Once the market truly opens up again and lenders, which have been very selective in where they lend, come back into the market in droves and in a more significant way, I think you may well see cap rates continue to fall. But for probably the next two three quarters, I think it will be a largely flattening of cap rates.”

Earlier during the pandemic, many Americans largely postponed elective procedures, which put a dent on revenues for medical office tenants. But in states where those facilities are reopening, industry sources are reporting pent-up demand.

“We saw very few delinquencies, perhaps a handful of rent deferral requests, but by and large, the healthcare medical office tenancy as a whole stood up very well,” says Brenner. “Certainly now that elective procedures are back on in most parts of the country, MOBs are poised to bounce back and will continue to be a stable and reliable asset class.”

“Medical practices are running at 90 to 95 percent of pre-pandemic levels,” says Steve Hall, senior managing director for healthcare advisory services at Transwestern, who expects this level of demand to continue through the end of the year.

“Many of the company’s tenants are back to 80 percent of pre-pandemic levels of procedures and services,” says Jon Boley, senior vice president of acquisitions and development for HSA PrimeCare, a firm that develops, leases and manages medical facilities.

“The reason these businesses are not back to 100 percent is because they are having to do above-standard cleaning in order to disinfect surgery centers throughout the day,” Hall notes. “A factor that will shore up MOB assets in the future is the dearth of new construction happening right now. During a pandemic, a lot of people aren’t pulling the trigger on a brand new construction. The lack of construction going on right now I think is really going to keep the market strong since there is not going to be oversupply.”

 

Source: HREI

Amazon’s First Neighborhood Health Center Will Be In Dallas-Fort Worth

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Amazon is launching a healthcare pilot with Crossover Health in Irving, offering a clinic designed to serve Amazon employees at nearby fulfillment centers and their families. 

California-based Crossover Health opened its first clinic in the area earlier this year, looking to directly contract with employers in the area and offer direct primary care services that include integrated primary care, musculoskeletal services, and behavioral health and health coaching. The direct primary care practice can be difficult to scale when it asks residents to purchase a membership on top of existing health insurance, but partnering with employers is a win for employers who want value and for the growing clinic. 

“Across the U.S., an increasing number of patients do not have easy access to a primary care physician and instead utilize emergency or urgent care options, which is not only more expensive for patients, but also overlooks important preventative care opportunities,” said Darcie Henry, Amazon’s Vice President of Human Resources via release. “We want to solve that for our employees, and the launch of these new Neighborhood Health Centers will provide a range of quality primary care services for employees across the country – further strengthening Amazon’s industry-leading benefits program, which provides comprehensive healthcare for employees starting on day one of employment.” 

According to Derek Rubino, Senior Program Manager of Workplace Health & Safety at Amazon, Amazon chose DFW because it has one of the largest populations of Amazon employees in the country.

“With large fulfillment centers in Coppell and Haslet and other sites near Dallas, Garland, and Fort Worth, it is a perfect place to try out this model,” Rubino says. “Amazon also looked at primary care usage, health of its employees, and emergency room overuse to make its decision.”

 The pilot program is launching five markets across the country, and by the end of the year, there will be six nearsite clinics to serve Amazon employees in DFW alone. Current and future Crossover locations have been chosen to serve areas where a high concentration of employees live and work. The first clinic is open to all Crossover members, but future Crossover clinics will only be for Amazon employees.

Crossover also acquired a digital health company Sherpaa, allowing it to continue to serve patients during the pandemic. The clinic even has a virtual care studio specifically designed for physicians to do virtual visits so that they don’t use an exam room. 

Rubino says Amazon chose Crossover health because of its virtual health platform, convenient access, and holistic care all under one health. Current Amazon employees can keep their primary care physicians if they want, but Crossover offers another option. Eventually, hours at Crossover will go from 7 a.m. to 11 p.m. six days a week to allow Amazon’s shift workers to access the facility,  

“The landscape is changing drastically,” says Nate Murray, Co-founder and chief revenue officer of Crossover. “I think, through the pandemic, we fell upon something that is more convenient, and even though some people are a little apprehensive [about trying virtual care], they find out that it actually was a great visit and super convenient.”

“We are proud to collaborate with Amazon to support the health and wellness of Amazon’s employees. Crossover Health believes that exceptional primary care is central to continued health and well-being,” said Dr. Scott Shreeve, CEO and co-founder of Crossover Health via release. “Now it’s more important than ever to make care available through multiple channels and across the full continuum. Our advanced primary care model will serve as vital infrastructure to deliver expanded access to care in-person and online to meet the needs of Amazon’s employees and their families.” 

 

Source: D CEO Healthcare Magazine

Partners To Bring SCL Health Anchored Facility To Candelas Community

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Mortenson Development, Inc., the development arm of top-20 U.S. builder Mortenson, just announced it will soon break ground on a new 43,732-square-foot Class A medical office building at the intersection of West 91st Place and Candelas Parkway within the rapidly growing Candelas master-planned community in Arvada, Colorado.

Mortenson has worked closely with SCL Health to deliver more than 40 projects over the last decade. This marks the first project on which Mortenson will act as a developer/owner for the nonprofit healthcare organization.

“Access to quality healthcare has never been more important, and we’re proud to be working with SCL Health to bring this primary care facility to the Candelas community,” said Taber Sweet, Director of Real Estate Development with Mortenson Development, Inc. in Denver. “Acting as a development partner on a vital healthcare project like this is one of many ways Mortenson delivers value to its clients and invests in building stronger communities here in Colorado.”

The new two-story facility, designed by Davis Partnership Architects, will provide the Candelas community with convenient access to primary care physicians. Mortenson was responsible for site planning and design services for the development, including managing all entitlements and city approvals. The project team anticipates breaking ground on the new facility later this summer, with completion anticipated in summer 2021.

“With more than 4,300 new homes currently under construction in Candelas, we recognized the growing need for access to compassionate, high-quality and effective care in this community,” said Steve Chyung, Senior Vice President with SCL Health. “This project represents an important expansion of SCL Health’s network of care. Through our work with Mortenson, we look forward to delivering a new facility that will allow us to provide comprehensive, mission-driven care solutions in the heart of Candelas.”

SCL Health provides coordinated care through eight hospitals, more than 150 physician clinics, and home health, hospice and mental health and safety-net services primarily in Colorado and Montana.

Mortenson partnered with Seavest Healthcare Properties LLC in a joint venture to develop the project. Seavest is a sector-specific investor focused on investing in medical office buildings and outpatient facilities of all types that are strategic to hospitals. Seavest has been a recognized owner and manager of these critical assets for more than 30 years.

“We are pleased to join with Mortenson to assist SCL Health to bring healthcare services to Candelas,” says Jonathan “John” Winer, Seavest Senior Managing Director and Chief Investment Officer. “Mortenson has done a terrific job of designing and planning for the project and we look forward to getting in the ground shortly.”

Associated Bank provided the construction financing loan totaling approximately $9.6 million. Since 2012, Mortenson Development, Inc. has partnered on the development of nearly 700,000-square-feet in the healthcare space.

 

Source: HREI