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KKR Forms JV To Target $1B In Healthcare Real Estate

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Global investment firm KKR has formed a joint venture with Cornerstone Companies, a healthcare real estate investment, development and management firm, to acquire and develop a portfolio of healthcare properties across the United States.

KKR and Cornerstone have seeded the portfolio with the recapitalization of 25 healthcare properties owned by Cornerstone. With funding commitments provided by KKR’s real estate and credit funds and Cornerstone, the Joint Venture is positioned to acquire more than $1 billion in real estate assets over the next few years.

The portfolio recapitalized by KKR and Cornerstone includes 713,705 square feet of medical office buildings and ambulatory surgery centers located across 12 states, with in place long-term leases to a high quality group of healthcare systems, physician group practices and surgery center operators. Cornerstone and KKR will work together to grow the portfolio through acquisitions and net lease development opportunities, with a focus primarily on long-term leased single-tenant medical office buildings, ambulatory surgery centers and facility-based outpatient healthcare assets.

“KKR is one of the world’s largest investment firms with incredible connectivity across industries, including deep experience investing in the healthcare and real estate sectors,” said Tag Birge, President and CEO of Cornerstone. “This strategic partnership significantly increases our reach and capacity to deliver investment and development solutions for leading physician groups and health systems. We are very excited to work with a partner in KKR who shares our commitment to lasting client relationships and strong focus on portfolio construction and underwriting.”

“We are pleased to collaborate with the highly-regarded team of industry specialists at Cornerstone to invest in a scaled portfolio of healthcare properties,” said Peter Sundheim, Director at KKR. “The recapitalization of 25 well-situated seed assets creates a strong foundation for our Joint Venture.”

“We will contribute capabilities from across KKR’s real estate, credit and healthcare industry teams to support sourcing and underwriting of assets for the Joint Venture,” said Michelle Hour, Director at KKR. “As investors in the healthcare sector for more than two decades, our relationships and understanding of the needs of tenants will help us to provide attractive ownership for their mission-critical real estate.”

Additional financial terms of the Joint Venture and recapitalization transaction were not disclosed.

Newmark’s Healthcare Capital Markets Group advised Cornerstone and KKR on establishing the Joint Venture, represented Cornerstone on the portfolio recapitalization transaction, and provided advice to KKR on debt financing. CBRE’s Healthcare and Life Sciences Capital Markets Group provided buyside advisory services to KKR on the portfolio recapitalization transaction. Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.

 

Source: Real Estate Weekly

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