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The Pandemic Has Made Healthcare More Desirable

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“The pandemic increased demand and made healthcare a more desirable asset class,” Rahul Chhajed, VP and senior director of healthcare at Matthews Real Estate Investment Services, tells GlobeSt.com about how the asset class fared during the pandemic.

For one, medical properties moved onto the list of darling asset classes, and it isn’t hard to understand why.

“It is no longer just a recession that investors are worried about. If there is another pandemic, healthcare services are something that people are always going to need. At the end of the day, everyone needs medical care,” says Chhajed.

With the exception of a temporary pause in the market at the beginning of the pandemic, when elective surgeries and other healthcare services were paused to allow healthcare providers to focus on COVID-19, healthcare properties outperformed other asset classes. Chhajed notes that many tenants didn’t need rent relief and continued to pay rent.

This year, investors have been trading out of more challenged asset classes, like retail and office, in favor of medial facilities.

“COVID really provided a proof of concept for the industry to show that this product type is here to stay. It is not only institutional, but it is an asset class that private capital should look at as well,” says Michael Moreno, VP and senior director of healthcare at Matthews Real Estate Investment Services.

Institutional capital has been the dominant player in the healthcare sector, and that is because it can be a more complicated asset class. Now, both institutional capital and private investors are competing for deals.

“More institutions have definitely entered the ring, but we are also seeing the private markets have started to buy these deals,” says Moreno.

And, there is a third player: owner-occupiers. Existing owners are looking at the demand—which has driven cap rates down significantly—and deciding to sell.

“The sale-leaseback market is really picking up, and a lot of that has to do with pricing,” says Moreno.

Over the last few years there has been significant cap rate compression, and owners would rather take the proceeds and put it back into the business and grow.

“Private buyers love those deals because they typically contain long-term leases and they are triple net,”  Moreno says.

On the lease side, retail owners are finding new users in healthcare. Many clinics and ambulatory centers are signing leases in retail facilities as part of the trend from in-patient care to out-patient care.

“Retail-centric healthcare is great for providers because the care is coming to the consumer,” says Chhajed. “A lot of these healthcare systems are looking for ways to provide ease of access, and retail centers meet those needs to make healthcare more accessible. The confluence of these trends is creating a heyday for medical assets after the pandemic. Now healthcare is looking stronger than ever.”

 

Source: GlobeSt.

Cornerstone Companies MOB Fund VI Acquires 12 Medical Properties In Nine States For $48.7 Million

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Cornerstone Companies, Inc. has closed on its sixth medical office building portfolio; acquiring 12 healthcare real estate properties in nine states totaling more than 155,000 square feet.

The properties have been acquired by Cornerstone Fund VI for $48.7 million by Cornerstone MOB Fund VI, a private equity fund focused solely on medical  real estate. Cornerstone is the fund’s general partner.

The fund’s portfolio includes six individual clinical MOBs, three clinic/ambulatory surgery centers, an imaging and diagnostics center, a senior care facility, and a single stand-alone ambulatory surgery center. The facilities are located in the Midwest, Southeast and Southwest

The Fund VI portfolio assets include:

• Gateway Clinic Medical Office Building in Moose Lake, MN – an 18,000-square-foot medical office building on the campus of Essentia Health’s Moose Lake Hospital, which is a level IV trauma center. Gateway Clinic is the largest independent multi-specialty practice along the I-35 corridor which connects Minneapolis and Duluth. Gateway Clinic provides five core specialties including general surgery, emergency medicine, family medicine, obstetrics and internal medicine.

• Owensboro Dermatology ASC in Newburgh, IN – a 10,000-square-foot dermatology clinic and ambulatory surgery center scheduled to be completed in November 2021. The new ASC and clinic will have eight exam rooms, four procedure rooms and one operating room. Owensboro Dermatology Associates is the market leading dermatology practice in the Evansville-Owensboro market, and the second-largest dermatology practice in a 100-mile radius of Louisville, KY.

• Vanderbilt University Medical Center Shelbyville Clinic in Shelbyville, TN – a 16,000-square- foot multi-specialty clinic including women’s health, endocrinology, internal medicine, wound care, family medicine, pulmonology and sleep medicine. VUMC operates nine hospital systems and 48 hospital locations, inclusive of clinics, physician practices and affiliates practices.

• Crestview Medical Office Buildings in Crestview, FL – three medical office buildings comprising more than 25,000 square feet on the campus of North Okaloosa Medical Center, approximately 45 minutes northwest of Pensacola. The buildings feature multi-specialty clinical space, including urology, cardiology, rehab, podiatry, primary care, sleep lab and human resources.

• Keystone Eye Associates ASC & Clinic in Philadelphia, PA – a 14,000-square-foot, full- service ophthalmology clinic and ambulatory surgery center. Keystone Eye Associates is one of the leading ophthalmology practices in Philadelphia, PA. Amongst 18 independent ophthalmology practices in Philadelphia, Keystone Eye Associates is the highest performing as ranked by procedure volume.

• Atlantic Gastroenterology and Endoscopy Center in Greenville, NC – a 9,000-square-foot outpatient endoscopic facility specializing in colorectal cancer screening and the treatment of various diseases involving the digestive tract. The property houses the twenty-year-old practice clinical practice as well as a two operating room ambulatory surgery center.

• Hollywood Diagnostics Center in Hollywood, FL – a 9,500-square-foot full-service diagnostics center including open and high-field MRI, CT scan, PET scan, mammography with 3D tomo,  ultrasound and x-ray. The facility treats more than 30,000 patients per year.

• Surgery Center of Baton Rouge in Baton Rouge, LA – an 11,000-square-foot ambulatory surgery center which is home to the joint venture between Surgery Partners, Inc. and five leading  interventional pain specialists. Surgery Partners is a leading operator of surgical facilities, with more than 180 locations nationwide. The Surgery Center of Baton Rouge is the market leading interventional spine practice providing procedures, therapeutic injections and neurostimulation in a state-of-the-art setting.

• Henry Ford PACE Senior Care in Pontiac, MI – a 30,000-square-foot facility providing primary and specialty care, physical therapy and assisted living services for aging adults. PACE of SouthEast Michigan is a joint venture between Henry Ford Health and Presbyterian Villages, the largest assisted living operator in Michigan. PACE of Southeast Michigan operates six facilities in southeast Michigan and is a nationally recognized leader in the Program of All-Inclusive Care for the Elderly (PACE.)

• OrthoArizona MOB in Mesa, AZ – a 10,000-square-foot medical office building that is 100- percent leased to OrthoArizona, the second-largest orthopedic practice in Arizona. The MOB provides clinical orthopedics, podiatry and physical therapy services.

All of the Cornerstone MOB Fund VI assets are supported by net leases with a weighted average lease term for the entire 12-property portfolio of more than 10 years. Fund VI is projected to deliver a five-year average cash-on-cash yield of more than 11 percent to its investors.

Cornerstone has acquired more than $150 million in healthcare assets over the past four years amongst five other Cornerstone MOB Funds. Cornerstone sold MOB Fund I in 2018, generating a 17-percent IRR for its investors. Cornerstone MOB Funds II, III, IV and V generated cash-on-cash returns in 2020 of 11.51percent, 11.49 percent, 10.51 percent and 12.03 percent respectively.

About Cornerstone Companies, Inc.

Cornerstone Companies, Inc. is a leading healthcare real estate firm, drawing on more than 35 years of experience. With an exclusive focus on the healthcare real estate industry, Cornerstone helps physicians, hospitals, and third-party owners across the nation develop, build, lease, manage and optimize their healthcare real estate while enhancing the patient and provider experience. To  date, Cornerstone has successfully completed more than $1 billion of medical office developments and currently manages more than 100 medical facilities encompassing 7.7M SF. To learn more, visit cornerstonecompaniesinc.com.

 

Source: HREI

The Pandemic’s Impact On Health Care Design: Smaller, Flexible Spaces With Great Adaptability

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The pandemic rocked U.S. health care facilities in 2020, leaving them with falling revenue from moneymaking surgeries and ordinary care as physicians and nurses shifted their attention toward patients infected with the coronavirus.

But the real change will come three to four years from now, when the impact of new designs implemented on existing and new healthcare facilities are deployed based on what architects and physicians have learned over the past nine months.

“Health care clients are already shifting their focus and asking for smaller footprints and more space flexibility along with additional isolated, negative air pressure rooms,” said Architect and EYP principal Miranda Morgan, while speaking at Bisnow‘s ‘The Future of DFW Healthcare’ webinar. “The smaller footprints are just more efficient and lean. We are still providing everything that is needed, and we are still doing big huge patient towers. But instead of big luxury, patient rooms, clients are asking us to be closer to code and to get what you need in that space and provide the patient with a good experience, but don’t go overboard.”

A large focus of future design will be on keeping healthy and sick patients separate rather than feeding everyone through the same access points and maneuvering the same hallways. Luxurious common areas have lost some favor as health care systems shift toward making sure more rooms are available to isolate emergency care and hospital inpatients while also better managing various points of access to segregate healthy and sick populations on-site.

“We are examining the way patients flow through the facilities,” said Dwain Thiele, UT Southwestern Medical Centersenior associate dean. “Some of the most challenging are imaging facilities or places that previously did not have a large amount of space, hallways or waiting rooms. It is something we will be looking at in the future.”

“What we have seen through the pandemic from a needs standpoint is more access points for people to be seen and to have access whether through telehealth or smaller, faster clinics where people can get in and out,” Transwestern National Managing Director of Healthcare John Huff said. “I guess we realize we don’t all want to sit in a huge long waiting room for an hour.”

In the future, waiting rooms very well could be a thing of the past, with that square footage allocated to more isolated treatment rooms, health care experts said.

“Other trends here to stay include the ongoing push for more outpatient care centers and ambulatory facilities that can take care of non-life-threatening illnesses while hospitals are hit with pandemics,” Huff said.

“Technology also will play a significant role in reshaping the future of health care, with telemedicine, or remote health care visits, allowing hospitals to keep healthier patients away from pandemic-stricken areas,” Methodist Health System Chief Operating Officer Pamela Stoyanoffsaid. “I would say prior to COVID, we probably saw about 1% of visits in the outpatient setting with telehealth. In April and May, when we saw the first surge, we were probably up to 80% to 90% of our visits. When some of the restrictions lifted, telehealth usage dropped back down to 15%, but it’s expected to have a place in the future of health care services. It is now a massive part of what we do, and it is here to stay.”

 

Source: Bisnow