Nothing But Good News Abounds In The Healthcare Real Estate Sector

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At a time when U.S. and international headlines have been full of bad news, there seems to be nothing but good news to report about the healthcare real estate (HRE) space.

To start with, medical office building (MOB) sales in 2021 – despite the lingering of the COVID-19 pandemic – broke the all-time record for volume at $17.4 billion, topping the previous record of $15.4 billion set in 2015.

In addition, occupancy rates increased significantly last year, absorption of MOB space is as strong as ever, MOB construction starts are on the rise, and third-party owned MOB projects made up a larger share of projects than any of the previous seven years.

This data and more was presented during a session at last week’s Revista Medical Real Estate Investment Forum 2022, which was held at the Loews Coronado Bay Resort from March 2-4. The annual event is put on by Arnold, Md.-based Revista, which gathers a wide range of HRE data for its subscribers.

Kicking off the agenda on the second day of the conference, March 3, Revista Principals Mike Hargrave and Hilda Martin provided the audience with a wide variety of data from 2021 during a session titled “Medical Real Estate Trends & Top Markets.”

 

Source: HREI

New Medical Office Building Pitched For West Orange County In Apopka

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A new medical office building has been proposed for west Orange County.

Longwood-based Dafflyn Property 2 LLC plans to construct a new 11,500-square-foot medical office building at 2106 Plymouth Sorrento Road in Apopka on 1.31 acres, according to city documents. A project that size could cost $1.13 million to build, according to industry standards.

The property, which totals 8.95 acres, already has an Apopka Storage location that was built in 2021 on the site. The medical office building is slated to be built adjacent a 0.68-acre lot that would be preserved for future development. The project will go before Apopka’s development review committee on March 2.

Dafflyn Property 2 LLC bought the vacant site in March 2018 for $1.4 million from a trust, according to the Orange County Property Appraiser. The 2021 appraised value for the property is $1.21 million.

Representatives with the developer were not available for comment. The Dafflyn entity is managed by Central Florida dentists Dr. Robert Bliss, Dr. Bobby Garfinkel and Dr. Dennis Horanic.

Meanwhile, the medical office building market has remained steady during the Covid-19 pandemic. There is more than 16 million square feet of properties that include some sort of medical office under construction, according to CommercialEdge, which is part of Santa Barbara, California real estate data company Yardi Systems Inc.

The changing demographics of the U.S. also will create more medical office demand. About 12.8% of Apopka’s population is comprised of people age 65 and older, compared to 12.3% for Orange County.

By 2030, the U.S. is projected to have more people age 65 and older than those age 18 and younger, according to the Census Bureau.

“As the aging population seeks health services closer to home, we expect to see increased demand for medical office buildings in non-campus settings,” said a CommercialEdge report.

That demand could draw conversions for some suburban office buildings outside of health campus settings, but they would have to fit specific development standards when compared to regular office space, like improved HVAC and different ceiling heights.

 

Source: OBJ

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

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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.