Capital Partnerships Are All The Rage In Healthcare Real Estate

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In the early days of the medical office building (MOB) sector, companies that had started to focus exclusively on developing, acquiring and managing such facilities often relied on a network of high net worth individuals, friends and family included, to invest in their projects.

In today’s growing, highly capitalized and sophisticated healthcare real estate (HRE) market, where capital often needs to be deployed quickly and at the lowest cost possible, that type of so-called “country club” capital stack can still work for certain firms and on certain projects.

However, a growing number of growth-oriented companies focused exclusively on HRE facilities, including MOBs, are turning to and aligning with large, deep-pocketed institutional capital partners and fund managers to invest in their developments and acquisitions.

A good example is Anchor Health Properties, a more than three-decades old HRE developer that, beginning with a new management team in 2015-16, embarked on a growth strategy based on expanding three verticals in order to offer wider array of services for its clients, including health systems: management, leasing and investments.

“These all play well off of each other and contribute to the growth of the other verticals,” said James Schmid, Anchor’s chief investment officer. “When we were starting to grow those three verticals, I would say we had modest means to build our platform, and so in order to do a large volume of transactions we knew we had to bring in institutional partners to be able to chase more investments and bring more flexibility, including being able to close quickly on deals, in order to work with best-in-class operators.”

Mr. Schmid, who helps run Anchor with CEO Ben Ochs, made his comments during a panel session at last week’s BOMA International Medical Office Building + Healthcare Real Estate Conference in Minneapolis. The panel, moderated by John Nero of Hammond Hanlon Camp (H2C), was titled: “Investor Strategies: Aligning with Capital Providers.”

He, as well as the other panelists, noted that large, institutional capital partners who want to own MOBs need to be willing to make investments that can start at prices in the $15 million range.

 

Source: HREI

Construction Costs Having Developers Shoulder More Healthcare Real Estate Costs

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As construction prices have spiked, many businesses have responded by cramming more employees into less space with open floor plans, coworking and the reduction or outright elimination of private offices.

But those methods to help reduce construction tabs are more elusive when it comes to medical office space.

“Healthcare is a more highly demised space than any other category. Way more than office, and especially office now,” MB Real Estate Vice President Brian Burks said. “You still need your exam rooms, your waiting rooms, your back office, your nurses stations.”

As healthcare demand accelerates — especially as baby boomers require more medical attention and care — efforts by healthcare systems and medical practices to expand are being met with larger construction tabs.

“Costs to build out medical office practices have jumped at least 20% in the past two years,” said Burks, who will be a panelist at Bisnow’s Atlanta State of Healthcare event May 8. “It used to be $60/SF on a 10-year deal. Now in order to build it out, you’re in the $80 to $90 [per SF range] for the kind of standard building finish.”

“For smaller medical practices, especially those looking to capture more patients by expanding the number of offices, these costs can be hard to swallow,” Ackerman & Co. President Kris Miller said. “A practice that previously would have funded, say, $15 a square foot, now they’re funding $30. They really don’t have the ability, on average, to do that.”

That has Ackerman and other firms helping pick up the tab on the capital costs of building out medical office space for clients. In exchange, physician groups are agreeing to longer lease terms or higher tenant improvement allowances that are paid back over the life of a lease. Occasionally, physicians are even investing equity into their own real estate deals.

“Smaller practices may be staying put instead of moving,” Caddis Healthcare Real Estate Director Christine Gorham said. “These practices may be handcuffed as well by larger healthcare trends, such as shrinking reimbursements. Most folks we are seeing are not doing complete re-dos.”

“They’re doing more a refresh.” Miller said. “Many practices are needing to grow their real estate anyway in order to push business forward, whether with expanding existing offices or establishing new ones. Issues with reimbursements are less a problem over losing patients to other expanding practices. After all, a change of, say, $20 in a reimbursement is not nearly as impacting on a practice as the loss of two visits a day. Being able to see more patients, or establishing a new office in a community with strong demographics, will do much more in the long run. At the end of the day, pressure on reimbursement is certainly not a good thing for physician practices, but it’s still a volume business. Real estate is fundamentally very much part of a doctor’s business. A well-designed space affects how many patients they can see in an hour.”

 

Source: Bisnow

Healthcare Facilities Management Market To Rise At A Valuation Of $600 Million By 2024

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The Healthcare Facilities Management Market is expected to exceed more than US$ 600 Million by 2024 at a CAGR of 14% in the given forecast period.

The demand within the global Healthcare Facilities Management market is projected to increment at a formidable CAGR of 14% throughout the forecast period of 2017 to 2024, gaining traction from a number of factors, such as increasing government support for sturdy aid infrastructure during a number of rising economies, notably in Asia Pacific, prevalence of several chronic diseases, increasing disposable income of the urban population, and technological advancements both hard and soft services.

Cloud computing and also the internet of Things are also expected to open new opportunities for the vendors operating within the global Healthcare Facilities Management market, who are yet to explore vast unmet demand in rural areas across the world.

The scope of the report includes a detailed study of Healthcare Facilities Management Market with the reasons given for variations in the growth of the industry in certain regions. The report covers detailed competitive outlook including the market share and company profiles of the key participants operating in the global market.

Key players profiled in the report ABM, Aramark, Ecolab USA Inc, Founders3 Real Estate Services, ISS World Services A/S, Jones Lang LaSalle, IP, Inc, Medxcel Facilities Management, Mitie Group PLC, OCS Group and Sodexo. Company profile includes assign such as company summary, financial summary, business strategy and planning, SWOT analysis and current developments.

The Healthcare Facilities Management Market is segmented on the lines of Service Type and Regional Analysis. By Service Type this market is segmented on the basis of Hard Services its covers Plumbing, Air Conditioning Maintenance, Fire Protection Systems, Mechanical and Electrical Maintenance and Others. And Soft Services its covers Cleaning and Pest Control, Laundry, Catering, Waste Management, Security and Others.

By Regional Analysis this market is segmented on the basis of North America, Europe, Asia-Pacific and Rest of the World.

The report provides:

1. An overview of the global market for Healthcare Facilities Management Market and related technologies. Analyses of global market trends, with data from 2015, estimates for 2016 and 2017, and projections of compound annual growth rates (CAGRs) through 2024.
2. Identifications of new market opportunities and targeted promotional plans for Healthcare Facilities Management Market.
3. Discussion of research and development, and the demand for new products and new applications.
4. Comprehensive company profiles of major players in the industry.

Reasons to get the report:

1. Obtain the most up to date information available on all Healthcare Facilities Management Market.
2. Identify growth segments and opportunities in the industry.
3. Facilitate decision making on the basis of strong historic and forecast of Healthcare Facilities Management Market.
4. Assess your competitor’s refining portfolio and its evolution.

Click here to browse the full report  of the Healthcare Facilities Management Market By Service Type (Hard Services, Soft Services) and by Regional Analysis – Global Forecast by 2018 – 2024 or request a sample report,  

 

Source: MarketWatch