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Allianz Lends $234M For MOB Portfolio Acquisition

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In a $620.4 million deal, Nuveen Real Estate and NexCore have acquired a coast-to-coast portfolio of health-care and life science properties encompassing nearly 1.2 million square feet. The seller was IRA Capital.

The majority of the portfolio is a diversified group of 27 health-care assets that traded for $463 million. The portfolio encompasses properties in multiple states: Arizona, California, Florida, Illinois, Michigan, North Carolina, New Jersey, New York, Pennsylvania, Texas and Wisconsin.

Totaling nearly 750,000 square feet, the properties range from medical office buildings, micro-hospitals and ambulatory surgery facilities to cancer treatment centers. NexCore Group joined Nuveen Real Estate in underwriting the deal and will manage the assets.

The health-care portion of the transaction was led by Nuveen Real Estate’s new U.S. Cities Office Fund and brings the value of the firm’s holdings in the sector to more than $1 billion. Andrew Pike, head of health-care, cited the firm’s plans for aggressive growth in the sector.

Allianz Real Estate provided a $234 million loan toward the medical office acquisition. The loan will provide 51 percent of the total acquisition price, and the sponsors will have $228.9 million of equity in the transaction. The deal is structured on a seven-year term with a fixed-rate tranche of $163.8 million (70 percent) and a floating-rate tranche of $70.2 million (30 percent).

The portfolio is 99 percent occupied by 38 tenants, of which 92 percent are investment-grade credit healthcare systems. The portfolio rent roll has a weighted average unexpired lease term of 12 years, providing for a reasonable lease rollover profile during the loan term, according to Allianz.

Twenty of the 27 properties are in Certificate of Need (CON) states, where local governments require an extensive approval process to demonstrate a need for new healthcare facilities, providing high barriers to entry and regulatory restrictions around new supply.

Medical Sector Recovers

In a prepared statement, Mike Cale, co-head of U.S. Debt, Allianz Real Estate, U.S., said:  “The pandemic has emphasized the need for improved access to health-care. That trend has been illustrated by the demand for both outpatient facilities and hospital space for acute care. The medical office sector represents a unique, resilient asset class.”

This transaction marks Allianz’s second U.S. debt deal with Nuveen Real Estate, following Allianz’s $94 million financing of a six-property industrial portfolio for Nuveen’s U.S. Cities Industrial Fund in 2020.

The lack of demand for routine care and limitations on elective procedures, both in response to the COVID-19 pandemic, contributed to a 6.4 percent loss in health care employment in 2020, according to an April report from CBRE. That loss, however, was much less than in the overall economy, and health care jobs are rebounding rapidly.

Medical office buildings showed similar resilience, with annual investment volume falling by just 12.7 percent, the smallest decline for any major product category. Meanwhile, medical office property sales volume jumped in the fourth quarter of 2020, as cap rates continued a decade-long decrease.

Also part of the deal is the $157 million acquisition of two life science properties in Madison, Wis., and Orange County, Calif. Fully leased to three tenants, the assets comprise 420,000 square feet and will add to Nuveen’s 4 million-square-foot life science portfolio. The properties were acquired via TIAA’s balance sheet, according to Nuveen Real Estate.

Since November 2020, Nuveen and NexCore have teamed up on transactions valued at $687 million, noted Todd Varney, NexCore’s chief development officer & managing partner. The assets include 34 buildings totaling 1.4 million square feet, along with 200,000 square feet in development.

 

Source: Commercial Property Executive

Nuveen Acquires $620M Life Science, Healthcare Portfolio From IRA Capital

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Nuveen Real Estate has closed on the acquisition of a 29-building national healthcare and life science portfolio for $620 million from IRA Capital.

The transaction was spearheaded by Nuveen’s newly launched U.S. Cities Office Fund, which is part of Nuveen Real Estate’s Global Resilient Series of open-end, core investment funds.  These funds aim to capitalize on long-term, structural real estate themes and demographic megatrends by investing in dynamic and resilient cities to achieve diversification, income and long-term capital growth.

In the United States, these vehicles provide investors the opportunity to efficiently customize their core allocations across the four primary property sectors – Multifamily, Retail, Office and Industrial.  This new acquisition will augment the Fund’s existing exposure to healthcare and life science assets through the addition of a credit-backed portfolio focused on healthcare.

The healthcare portion of the portfolio was acquired by the Fund alongside a strategic third-party institutional capital partner for $463 million. The 750,000-square-foot portfolio consists of 27 individual properties, diversified across healthcare facilities with varying levels of acuity and specialization uses, including medical office buildings, micro-hospitals, ambulatory surgery centers, and cancer centers.

The portfolio was evaluated and underwritten alongside strategic healthcare partner NexCore Group who will manage the portfolio nationwide.

“This is a foundational investment as we launch the Fund and will provide immediate scale in a dynamic and growing sector,” said Bill Abramowitz, Portfolio Manager of the U.S. Cities Office Fund.

The diversity across markets, tenants, lease term and tenant business practices, provides both significant risk mitigation and stability. Portfolios with these attributes and scale are difficult to identify and secure, demonstrating Nuveen’s execution abilities.

The new acquisition provides the fund increased exposure to the healthcare sector, which has been a steady performer through market cycles and the COVID-19 pandemic as it is less subject to work-from-home and other risks given the need for in-person interaction and services. The underlying healthcare industries have positive fundamentals that continue to require additional specialized operating environments. Nuveen expects these alternative office sectors to continue to outperform.

“With this transaction, Nuveen Real Estate’s healthcare real estate portfolio is well over a billion dollars. We have a goal to aggressively grow this sector over the near-term given the strong demographic tailwinds driving demand for quality healthcare space,” noted Andrew Pyke, Head of Healthcare for Nuveen Real Estate.

“As demographic and economic patterns continue to develop, we see increased healthcare demand in U.S. markets, including treatment, research and manufacturing. This will have an expansionary effect on the related real estate, including medical office and life science,” said Chad Phillips, Global Head of Office at Nuveen Real Estate. “Our firm has been investing in these spaces and continues to see compelling opportunities to deploy capital.”

The life science portion of the portfolio was acquired by TIAA’s balance sheet, commonly referred to as the General Account, for $158 million. The 420,000 s/f portfolio is comprised of two life science properties located in Orange County, CA, and Madison, WI, both of which have emerged as significant life science clusters. The portfolio is 100 percentleased to three creditworthy tenants.

The acquisition is consistent with the GA’s strategy to increase its exposure to alternatives, specifically life sciences. The portfolio will build meaningful scale, increasing Nuveen’s four million-square-foot life science ownership footprint.

 

Source: Real Estate Weekly

IRA Capital Expands Medical Office Portfolio With Florida, Pennsylvania Acquisitions

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Southern California private equity firm IRA Capital (“IRA”) announced the acquisition of two ambulatory surgery center facilities in the Florida and Pennsylvania markets.

The Florida property is 100% leased to The Center for Specialized Surgery (“TCSS”), an orthopedic-focused surgery center operated by Regent Surgical Health (“Regent”) in partnership with Lee Health, a leading health system in Southwest Florida.

The Pennsylvania property is leased to Pocono Ambulatory Surgery Center (“PASC”), a multi-specialty surgery center operated by Surgical Care Affiliates (“SCA”) in partnership with Lehigh Valley Health Network (“LVHN”), a leading health system in the Lehigh Valley region.

The Center for Specialized Surgery – Lee Health

The Center for Specialized Surgery is located in Fort Meyers, Florida and comprises approximately 9,000 Square Feet. The 3-OR facility was built in 2012 and is operated by Regent Surgical Health in partnership with 8 physicians from Orthopedic Specialists of Southwest Florida, whose offices are located adjacent to the center. The surgery center specializes in a full range of spine and orthopedic procedures, including total joint replacement. The property is situated across the street from Lee Health’s 415-bed Lee Memorial Hospital, the only Level II trauma center between Miami and Sarasota. In 2019, Lee Health acquired a majority interest in the surgery center partnership.

Pocono Ambulatory Surgery Center – Lehigh Valley Health

Pocono Ambulatory Surgery Center is located in Stroudsburg, Pennsylvania and leases approximately 32,000 square feet of the facility, which features three operating rooms, a mix of pre and post operation bays, an X-Ray room, and several pre-operation exam rooms. The center employs more than 35 surgeons, and offers ambulatory procedures in more than 15 specialties including gastroenterology, plastic, colon-rectal, ophthalmology, orthopedic, podiatric, and ENT surgery. IRA and PASC signed a new long-term lease for the facility as part of the transaction.

IRA Capital continues to be among the most active healthcare real estate investors, with these latest transactions representing the company’s thirteenth and fourteenth healthcare acquisitions in the past 75 days, totaling over $270 million. According to IRA Capital partner Amer Kasm, the key factors in IRA’s investment decision included each center’s strong performance and position within their respective markets, along with the financial backing of leading health system and the operational expertise provided by top-notch surgery center operators. IRA has continued to strategically grow its portfolio, and has remained focused on being a valuable partner by providing solutions to its tenants and partners during these uncertain times.

 

Source: HREI