With strong demographics and increasing demand for outpatient medical services, the Highlands Ranch Medical Campus is well-positioned for continued growth, longer lease terms, and rising rental rates.
Social and cultural shifts are making big impacts on the way healthcare facilities are built, managed and used. So said panelists at the recent GlobeSt. Healthcare conference in Scottsdale, AZ.
A rise in med-tail services, and the robust growth of life sciences have provided new avenues for CRE executives to invest and build medical properties and panelists said that business discipline has never been as important as it is today.
When Angie Weber, first vice president at CBRE, asked Ross Caulum, regional real estate director at Trinity Health, about what are some of the ways that owners, brokers and developers can do to make their life easier at Trinity Health, he simply said to “have patience,” noting that it takes a while to make a decision, then joked about rethinking that decision once everyone comes to a consensus.
“The way that the best transactions happen is when there is a compelling business case for advancing healthcare delivery, and that takes time,” Caulum said. “Today’s medical office building isn’t like yesterday’s MOB. The MOB of then was five days a week, 8-5. Not, it is seven days a week and is about providing the platform of delivering healthcare where and when it needs to be. But the challenge of that is finding the staff and the physicians, noting that there is a major shortage. The labor shortage, he noted, has affected the thought process in real estate decisions. We constantly have to ask ‘will the staff be there? You have to get to a stabilized staffing cost and I am not sure how it will get done.”
“Back in the day, staffing wasn’t part of the thought process,” Weber explained “Now, decisions are being made with staffing in the forefront of the mind.”
“There has become more business discipline because of the capital constraint and the pressure on profitability too,” said Caulum. “You have to really walk through what the business case is, view it with open eyes, and not just think you can get the staff onboard because when you look at the past few years and track record, it hasn’t happened that way.”
Source: GlobeSt.
Private equity firm IRA Capital has launched a $500 million closed-end fund focused on the acquisition of medical properties and senior housing assets in the U.S.
IRA Healthcare Real Estate Fund will target the acquisition, development and financing of healthcare assets in high barrier-to-entry and supply-constrained markets. The California-based company projects the fund will have annualized net returns of 14% to 16%.
“We intend to acquire assets across the risk spectrum with a focus on core-plus and value-add opportunities,” IRA Capital co-founder Jay Gangwal said in a statement. “The diverse strategy will result in a balanced portfolio with a combination of yield and appreciation, while providing downside protection given the needs-based demand.”
The fund is open to both institutional clients and high net worth investors, including domestic and foreign endowments, pension funds, insurance companies and family offices. Southern California-based IRA’s principals are adding their own capital to the fund, according to the release.
The push to acquire healthcare and senior housing assets comes as the sector slowly recovers from pandemic-era financial challenges, inflationary pressures and decreased occupancy. Overall occupancy at senior housing facilities was around 78% in April, up 5% from pandemic lows but still down from the 87% seen before the global health crisis.
The healthcare sector was at a moment of “peak volatility” in February, according to Spencer Levy, global client strategist and senior economic advisor at CBRE. The near-term uncertainty is being exacerbated by high interest rates, but Levy said an expected peak of rates later this year will present opportunities for buyers as asset values are likely to increase in one to two years.
“The current capital markets environment is also presenting unique re-positioning opportunities that we expect will create significant value and generate outsized returns,” Gangwal said.
Source: Bisnow
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