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40,000-SF Physician-Owned Medical Office Building Sells In Dallas-Fort Worth

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HREA | Healthcare Real Estate Advisors is pleased to announce the successful sale of a 40,000 SF Class “A” Physician-Owned Medical Office Building located in the greater Dallas/Fort Worth MSA.

The Class “A” medical office building was recently developed to consolidate multiple physician practice groups and ancillary services into one location. With 14 practice groups, the property provides patients with convenient access to a variety of specialties and services, including ENT, orthopedics, gastroenterology, pain medicine, family practice, and physical therapy.

HREA structured the transaction as a Hybrid Sale-Leaseback, which allowed the existing physician-owners to continue to own 24% of the building in a tax-deferred manner and achieve a valuation multiple of over 16 times. As a result, the physician-owners were able to get both liquidity in the form of distributions, as well as physician-ownership alignment between the practice (Opco) and the real estate (Propco).

 

Source: HREI

Healthcare Professionals, Investors Key In On Dallas-Fort Worth

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Dentists, optometrists, physicians and even veterinarians are opening practices in Dallas-Fort Worth at a rapid rate.

Among metropolitan areas, Dallas-Fort Worth-Arlington experienced the largest numeric growth not only from 2017 to 2018 (131,767) but also from 2010 to 2018 (1.11 million).

Dallas and Fort Worth are now the ninth and 13th most populous US cities. The 2018 total populations were 1.345 million and 895,008 respectively.

Migration, both domestic and international, as well as natural influx contributed to the growth in each of these areas, with natural increases serving as the largest source of population growth in Dallas and domestic migration serving as the largest source in Phoenix, according to the US Census Bureau.

Tarrant County was ranked eighth from 2017 to 2018 (27,463) and sixth from 2010 to 2018 (274,276) among cities including Arlington, Fort Worth and Grand Prairie. Fort Worth was ranked third among the top 15 cities with populations of 50,000 or more that had the largest numeric increase from 2017 to 2018 (19,552), according to Xite Realty.

Collin County experienced the fourth largest numeric growth from 2017 to 2018 (33,753) nationwide. Cities in Collin County include Allen, Carrollton, Frisco, McKinney, Plano and Richardson. Frisco and McKinney were ranked 10th and 13th respectively among the top 15 cities with populations of 50,000 or more that had the largest numeric increase from 2017 to 2018, says Xite.

With healthcare demand creating added opportunities, investors are clamoring to get in on the action. And late last month, HR Acquisition of San Antonio Ltd. did just that with its purchase of Magnolia Medical Tower in Fort Worth for an undisclosed price.

Private real estate investment firm Ridgeline Capital Partners purchased the 89,990-square-foot medical office building located in the Fort Worth Medical District three years ago. Ridgeline renovated the lobby and common areas in 2017, helping to increase its occupancy and rental rates.

The six-story building was built in 1985 and is located adjacent to the Baylor All Saints Medical Center, with access to Cook Children’s Medical Center, Texas Health Harris Methodist Hospital Fort Worth and Plaza Medical Center of Fort Worth. The building has a well-rounded tenant mix including primary care, oncology, orthopedics, cardiology, urology, OB/GYN, neurology and pain management.

“The building has no use restrictions while offering a lower rent than other on-campus MOBs in the area,” Jeff Axley, Ridgeline’s managing principal, tells GlobeSt.com.

JLL’s Healthcare Capital Markets Group brokered the sale on behalf of Ridgeline.

“This property is very well-situated in the Fort Worth Medical District, and we hope the new owners continue to enjoy the success we have experienced,” Axley says.

 

Source: GlobeSt.

Dallas Is Nation’s Second Most Active Medical Office Building Construction Market

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Dallas-Fort Worth has the second-most medical office building construction nationwide, accounting for nearly 1.5 million square feet and behind only New York City.

Medical office buildings are getting larger, farther away from hospital campuses, and remain profitable and well-occupied in the region, according to Revista data shared by Mike Hargrave at the North Texas Hospital, Outpatient Facilities, and Medical Office Buildings Summit. Private equity is an growing influence in health care transactions, and Dallas leads major Texas markets in average rent and rent growth for medical office buildings as well.

Dallas has 14 projects under construction in the medical office building space valued at $503 million and is second only to New York’s more than 2 million square feet worth over $1.3 billion. Houston is a close third, with 15 projects accounting for 1.2 million square feet and $344 million.

Since the 1980s, medical office buildings have moved from around 1.5 miles from the nearest hospital to often nearing three miles today. Building peaked around 2009 with nearly 35 million square feet built that year to around 21 million this year.

Meanwhile, individual projects are getting bigger. Most projects were less than 40,000 square feet prior to 2005, but since 2009, the average square foot for medical office building are closer to 60,000 square feet.

Healthcare practices are growing as well. Between 1981 and 2007, most practices were less than 8,000 square feet, but today the median size is 12,000 square feet.

Occupancy of investor owned outpatient buildings has remained fairly consistent since 2009, hovering between 90 and 92 percent. Relative to Austin, San Antonio, and Houston, Dallas has nearly as much as Houston in terms of inventory with 34.2 million square feet, but is on top of the heap in occupancy at 89.8 percent. Its $22.53 per square foot is also tops in Texas, as well as its year over year rent growth at 2.9 percent.

Nationwide for the last four years, healthcare real estate transactions remain strong, hovering between $15 and $20 billion for combined hospital and medical office building deals. Private equity’s influence on those deals is growing, as 2014 saw 27 percent of transactions grow to 61 percent by 2018. REIT has seen a sharp decline, from 53 percent of deals in 2014 to just 16 percent last year.

Across the US, there are 439 medical office buildings and 491 general hospitals under construction, accounting for 108.3 million square feet and $67.2 billion. The median size of a medical office building is 50,000 square feet and median value is $17 million. Median hospital size is 95,5000 square feet worth $50 million.

 

Source: D CEO Healthcare