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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

As They Scour Acquisition Opportunities, Which Assets Are High-Net-Worth Investors Favoring?

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As high-net-worth individuals (HNWI) and family offices survey the commercial real estate landscape, they’re seeing some peaks and some craters.

They assuredly lacked a roadmap for navigating a landscape marred by the coronavirus pandemic, though. However, HNWI and family offices are finding their way through this uncharted territory. And their compasses are pointing them toward commercial real estate investments that they believe are positioned for long-term growth.

In this climate, investors and advisers say, HNWI and family offices are steering toward acquisitions of medical assets, warehouses and multifamily properties.

“With real estate, my clients are willing to settle for lower short-term returns for stability. And the quality cash flow from real estate opportunities is attractive as a long-term investment for them,” says Mark Germain, managing director of Mercer Advisors Inc., a wealth management firm in Denver.

“In pursuit of stability and cash flow amid the current economic environment, HNWI and family offices are looking at recession-resistant asset classes,” says Charles “Chick” Atkins, principal of Atkins Cos., a real estate developer, investor and manager based in West Orange, N.J.

Atkins points to the medical office sector as a standout in this regard, thanks in part due to pandemic-spurred demand for health care services. This trend includes stand-alone offices, retail spaces, medical clinics and urgent care facilities, according to Atkins and others.

“Health care is essential, and people will still need to see doctors and other health care professionals no matter the economic conditions,” Atkins says. “While the use of telemedicine is on the rise, the aging population of baby boomers, coupled with the short supply of well-located, class-A medical offices, should help ensure a continued need for health care properties.”

Germain cites the warehouse sector as another one that’s attracting attention from HNWI and family offices. This includes supply chain warehouses (think Amazon) and refrigerated warehouses. In surveys by NAIOP, a commercial real estate group, 62.6 percent of commercial real estate and banking professionals reported acquisitions of industrial buildings in May, up from 57.3 percent in April.

During a May 28 call, Spencer Levy, chairman of Americas research at commercial real estate services company CBRE said “Although rental and vacancy rates for industrial properties will soften over the next year, the pandemic-fueled jump in e-commerce, the reshoring of manufacturing and the climb in business inventories bode well for long-term industrial demand.”

CBRE says a 5.0 percent increase in business inventories calls for an additional 400 million to 500 million sq. ft. of warehouse space.

“Industrial is not only going to perform better than any other asset class with the exception of multifamily, [but] we are actually more optimistic about industrial today than we were three months ago pre-COVID,” Levy said during the call.

Another sector drawing interest from HNWI and family offices is multifamily. NAIOP’s surveys indicate an uptick in multifamily acquisitions from April to May. CBRE data shows multifamily acquisitions totaled $38 billion in the first quarter, a year-over-year decline of just 1 percent.

In a June 1 report, CBRE said pandemic lockdowns and economic uncertainty lowered the multifamily turnover rate—the share of rented units not released each year—from 47.5 percent in 2019 to 42.1 percent in April. That’s the lowest turnover rate in over 20 years, according to the firm. This low turnover “is helping owners maintain occupancy and cash flows,” the report states.

An example of continuing faith in the multifamily sector: Greensboro, N.C.-based Bell Partners Inc., an apartment investor and manager, announced on June 3 that it had closed an apartment investment fund totaling $950 million. The fundraising goal was $800 million. The fund’s investors include accredited HNWIs.

The value-add Bell Apartment Fund VII empowers the company to spend more than $2.5 billion on apartments in its 14 target markets. The fund has already purchased three properties. Bell Partners has about 60,000 units under management.

“The fact that we were able to close Bell Apartment Fund VII above our target, despite the volatility caused by COVID-19, is a strong vote of confidence from our investors,” Jon Bell, CEO of Bell Partners, said in a news release.

Aside from industrial and multifamily properties, Cassidy senses an interest among HNWI and family offices in downtown office buildings in emerging markets.

“Whether they are core or value-add plays for investors, these spaces will be key components of these cities’ economic engines moving forward,” Cassidy says.

NAIOP’s surveys signal a dip in office acquisitions from April to May, primarily due to uncertainty over how the explosion in remote work will affect office demand.

Even though more employers are likely to switch fully or partly to remote work, MetLife Investment Management predicts the amount of occupied offices in the U.S. will reach 8.1 billion sq. ft. by 2030. That would represent an average annual growth rate of 1.4 percent from the 7.1 billion sq. ft. that’s occupied today. The historic average growth rate is 1.5 percent, MetLife noted in a May 14 report.

MetLife expects remote working trends arising from the pandemic will have “a relatively limited impact” on long-term demand for office space.

“Any stigma or fear that COVID-19 creates related to the office sector, especially as a growing number of firms announce real estate cost savings plans, could create investment opportunities,” MetLife says.

“HNWI and family offices also are watching hard-hit sectors like retail for potential bargains,” said Michael Finan, managing director of Chicago-based BMO Family Office LLC. “We are in a stressed period for real estate, but not distressed. There are many buyers on the sidelines with capital available, and new distressed property funds are being formed each day in anticipation of fire sale deals in the not-too-distant future. While distressed retail properties will certainly satisfy some investors’ appetite for deals, HNWI and family offices are also eyeing single-tenant net lease properties as sources of stable income. We recognize that brick-and-mortar retail is challenged, but not all consumers are satisfied with Amazon or Walmart.com.”

 

Source: NREI