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Unprecedented Growth Projected In Outpatient Care In The Next 10 Years

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The U.S. population is projected to grow by 22.5 million people, or just shy of 7%, between 2020 and 2030.

Remarkably, three-quarters of the population growth, or 17 million people, is in the 65 years or older cohort. Nearly 4 of 5 healthcare expenditure dollars is spent by this older group. With the aging population increasing from 17% of the U.S. population in 2020 to 21% of the U.S. population in 2030, medical encounters will be on a rapid rise.

Forecasted growth in patient care volumes between 2020 and 2030, however, show divergent trends between inpatient and outpatient utilization. Inpatient admissions are expected to decline in absolute number from 34.9 million stays to 34.6 stays, or a drop of 0.9% in this 10-year period.

Outpatient care stands in sharp contrast with estimated growth of more than 20%, representing an added 540 million annual outpatient visits over the 10 year period. In 2030, outpatient encounters are expected to top more than 3.2 billion serving the expected U.S. population of 355 million individuals in 2030, or 9 visits per individual a year.

The trend towards outpatient care and away from hospital stays is a decades-long shift. Today, more than 50% of health system revenue comes from outpatient visits, a radical change from hospital-centric care to patient-centric care. In the past 20 years, inpatient admissions per 1,000 population dropped from 120 to 103, a reduction of 14%. During the same time, outpatient visits per capita grew 26%.

Advances in technology and medicine have enabled care to grow and thrive outside the acute care facility, a trend that has been accompanied by better healthcare outcomes, lower mortality and greater patient safety. Outpatient care has fueled the growth of medical office buildings, both on campus and in the community, supporting the shift to the “patient-centric” mode of healthcare delivery.

The pandemic in 2020 and 2021 put a spotlight on the jeopardy with delivery of U.S. outpatient care in an acute care setting. Thus, the healthcare crisis accelerated the trends in increased care in locations such as urgent care centers, ambulatory surgery centers and other outpatient medical buildings. At the same time, telehealth exploded in use during the pandemic given the obstacles to safe visits at the height of the crisis. Telehealth visits grew from 1% of outpatient encounters pre-pandemic to 12.5% at the peak in April 2020 to 6% today with widely varying utilization by medical specialties.

The aging and growing U.S. population and the overarching trend towards outpatient care is strongly supportive of increased demand for healthcare real estate and for the growing clinical intensity and value of medical office buildings of the future. Quality buildings occupied by major healthcare providers serving patients with greater and more acute services means durable, long-term occupancy with growth in revenue that can support the operating costs associated with occupancy. Medical real estate is expected to grow and perform in the same resilient manner in the future which will be positive for the owners of the properties.

Recent Activity – New Listing – Investment Sale

Central Illinois MOB Portfolio – 321,355 s.f. – Decatur and Peoria, IL
Closed – Debt Placement

Hoag Health Center – MOBs & Urgent Care – 159,235 s.f. – Irvine, CA
Closed – Debt Placement

114 Pacifica Court – 110,392 s.f. – Irvine, CA
Closed – Investment Sale

Brookfield Commons – 91,186 s.f. – Richmond, VA
Closed – Investment Sale

Omega Medical Center – 77,511 s.f. – Rockville, MD
Closed – Equity Placement

Thomas Park Investments – 55,608 s.f. – Haverhill, MA
Closed – Debt Placement

Oakwood Medical Park – 36,419 s.f. – Round Rock, TX
Closed – Investment Sale

Fertility Centers of Illinois – 30,264 s.f. – Glenview, IL

 

Source: HREI

Ventas to Acquire New Senior Investment Group In $2.3 Billion Deal

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Ventas will acquire New Senior Investment Group in an all-stock transaction, valued at approximately $2.3 billion, including $1.5 billion of new senior debt.

With the acquisition of New Senior’s 12,404 units, Ventas is getting a geographically diversified portfolio of 103 private-pay senior living communities, including 102 independent living communities. It spans 36 states in the United States.

New Senior shareholders will receive 0.1561 shares of newly issued Ventas stock per share of New Senior common stock. That comes out to approximately $9.10 per New Senior share, a 31% equity premium based on its 30-day trading average and a 10% premium on its total enterprise value.

Ventas anticipates that the transaction will be approximately $0.09 to $0.11 accretive to its normalized funds from operations per share on a full-year basis. It is also expected to represent roughly a 6% capitalization rate on expected New Senior 2022 Net Operating Income.

“The transaction provides Ventas shareholders with an attractive valuation and accretion, and further positions us to win the recovery,” said Debra A. Cafaro, Ventas Chairman and CEO, in a prepared statement. “It continues Ventas’s longstanding track record of capital allocation excellence, builds on our deep experience with the independent living product and leading operators Atria and Holiday, and is a testament to the continued dedication and expertise of our outstanding team.”

The Ventas-New Senior deal is the second significant seniors transaction in the past week. Last week, Welltower announced that it was acquiring a portfolio of 86 seniors housing properties owned by Holiday Retirement for $1.58 billion, or $152,000 per unit.

The portfolio includes 80 nearly identical independent living and six combinations of independent living and assisted living properties. Upon the closing date of this transaction, expected to be in the third quarter of 2021, Atria Senior Living will assume operations of the properties and retain Holiday’s in-place senior management and staff.

The price tag of $1.58 billion represents a 30% discount to the estimated replacement cost, according to Welltower. The REIT says the transaction is expected to be approximately $0.10 per diluted share accretive to its normalized funds from operations during the first twelve months post-closing.

These transactions are occurring as seniors housing is primed for recovery. The JLL Valuation Advisory says demand in the sector will soon be at its highest point ever. Helping magnify that demand will be supply shortages as construction delays from the pandemic hindered starts. As a percentage of existing supply, units under construction dropped from peak levels of 7.0% in Q4 2019 to 4.7% in Q1 2021. JLL says the need to serve the middle-income population will increase, resulting from the global impact of COVID-19.

“Investors remain bullish on seniors housing and care investments,” said JLL Managing Director Zach Bowyer, MAI, head of Alternatives Asset Sectors, Valuation Advisory. “We anticipate market fundamentals to steadily improve and the market to re-stabilize between two and four years, depending on the location.”

 

Source: GlobeSt

Supurva Healthcare Group Targets Medical Office Buildings To Launch Its Real Estate Portfolio

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Booming is the only word to describe demand for medical office buildings,

With the nation slowly recovering from the COVID-19 pandemic, investors have concluded that the number one real estate investment opportunity today is MOBs. The formerly niche product has moved front and center as multifamily yields have compressed in recent years and the current retail and broader office investment landscapes have seen a large-scale disruption related to the ongoing COVID-19 issue.

The MOB asset class has exhibited consistent growth in recent years, buoyed by both increased demand for outpatient services and strong historical performance. MOBs are a significant subset of the greater office asset class and are growing in stature among experienced real estate investors. As the name suggests, MOBs are developed specifically for tenants in the medical field to consult with patients and perform various surgical procedures.

Supurva’s decision to invest in MOBs is coming at an opportunistic time as it seeks to create a portfolio of MOBs. It is the Company’s firm belief that that despite the economic turmoil caused by COVID-19 and the growth of telehealth, the MOB market has and will remain resilient. MOBs will sustain their power through the coming decades as the U.S. population ages, consumes more healthcare services, and receives more of those health care services at outpatient settings.

With advances in medical technologies, procedures that once could only be performed at hospitals or ambulatory care facilities can now be performed at the physician’s office, further fueling demand for MOBs. Investors are beginning to realize that MOBs represent an alternative asset class that is rapidly increasing in popularity.

“The number one takeaway from a recent real estate investment symposium was simple and straightforward,” reported Mr. Murphy, Supurva’s chief executive officer. “Investors should liquidate their other real estate holdings and put their money into MOBs. For real estate investors seeking a steady return on their investment the only safe, secure, and reliable real estate investment opportunity today is clearly MOBs. Supurva will be working with real estate professionals throughout the country to identify undervalued and underutilized medical office buildings.”

Jones Lang Lasalle, a leading real estate investment company reported in a February 2021 article that ​despite the economic downturn of 2020, there has been no downturn in demand for MOBs. Despite the financing obstacles witnessed during the pandemic, sales of MOBs exceeded $13 billion in 2020, which was on par with pre-pandemic sales levels in both 2018 and 2019. While other real estate investments declined by an average of 33%, MOBs sales remained strong, further demonstrating that MOBs can withstand pandemic-related operational challenges.

JLL went on to report that medical offices remain a favored sector for real estate investment as evidenced by new entrants into the space, including institutional investors, private equity funds, and individual investors. The compelling investment thesis for medical office space has generated a significant supply of investment capital (both debt and equity) waiting to be deployed into this space, providing a very liquid and competitive market for sellers.

The demand-driven increase in healthcare services from a growing and aging population (10,000 people per day turning 65) has pushed hospitals and health systems to create lower cost outpatient care alternatives.

JLL is not he only real estate investment company focusing on MOBs. According to the CBRE Group, compared to other asset classes and the overarching office class specifically, MOBs generally exhibit uniquely steady long-term occupancy rates. CBRE data suggests that medical office vacancy rates have consistently been lower than the total office sector, with vacancy rates falling from 11.1% in 2010 to 8.4% by mid-year 2018. According to the CBRE 2019 Healthcare Real Estate Investor & Developer Survey Results, 99% of CRE firms stated that between 2018 and 2019 the occupancy of their medical office portfolios either remained stable or increased from the year prior.

The strength of MOB occupancy rates is partly due to the length of leases that medical tenants typically sign. Because the physical features of MOBs are very specific-offices, medical treatment rooms, surgical rooms, and waiting rooms-the build-out is often more costly than that of a traditional office tenant, and medical tenants typically sign longer leases for this reason. Tenants also tend to stay put longer given the high switching costs associated with relocating. In addition to stable occupancy rates,

MOBs have also exhibited consistent rent growth over the past ten years, which can be seen in the below graph. In 2018, the average asking rental price increased to almost $23/SF, a 1.4% increase year-to-year. Average asking rent for U.S. MOBs remained at a near-record level in Q2 2019 according to CBRE.

“MOBs represent the Company’s future and MOBs represent the RX for success,” Mr. Murphy commented.

 

Source: yahoo! finance