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New Medical Office Building Breaks Ground In Frisco, Colorado

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The Panorama Corporation’s Summit Orthopedics, St. Anthony Summit Medical Center and Colorado Sleep Institute hosted their ground breaking ceremony on Tuesday, June 25, celebrating the start of construction on their new medical office building at 68 School Road in Frisco, Colorado.

Located at the intersection of School Road and Highway 9, the two-story, 30,200-square-foot facility will have clinical space for orthopedics, imaging and physical therapy, along with sleep study labs and other medical practices.

The project is a joint venture development between physicians from Panorama Orthopedics & Spine Center, Colorado Sleep Institute and Development Solutions Group, LLC, a Denver-based medical real estate development company.

The new 68 School Road Medical Center is scheduled to open in the Spring of 2020. The project has been designed by Boulder Associates Architects, one of the nation’s premier health care design firms and is being constructed by Denver-based general contractor GH Phipps Construction.

 

Source: Summit Daily

Healthcare Real Estate Offers Superior Returns

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Healthcare REITs outperformed the broad REIT Index and S&P 500 in the fourth quarter 2018, a period of great volatility when equity markets fell 20% at one point.

The NAREIT Healthcare Index closed the year up 3% from the start of the quarter with the S&P 500 ending down 14% and the broad REIT index off 7%.  Healthcare’s positive share movement is linked closely to the movement in U.S. Treasury yields; with 10-year rates declining from 3.05% to 2.68% during the quarter, investor appetite for returns from healthcare REITs grows.

The performance of the healthcare sector’s real estate offerings is a clear reflection that the growing demand for healthcare and long-term care is largely independent of the economy.  Healthcare real estate features long-term leases with predictable income from service providers fulfilling critical medical needs that continue even in an otherwise unpredictable market.

REITs such as Welltower have taken advantage of their buying power during this period, announcing sizeable acquisitions including the $1.25 billion CNL medical office portfolio with 55 buildings totaling 3.3 million square feet as well as more than $500 million of strategic medical office investments.

Healthcare REITs are using more ingenuity to stay in the game for acquisitions through strategic joint ventures.  HCP formed a $605 million joint venture with Morgan Stanley in August 2018 for a 2 million square foot medical office portfolio which included the acquisition of 16 buildings totaling 856,000 s.f. leased to Greenville Health, acquired from Healthcare Trust of America.  Healthcare REITs vie for strategic health system relationships to develop critical scale and future investment and development opportunities with market-leading providers.

While private equity dominated healthcare competitively through much of 2018 as REIT share values lost ground with the rise in U.S. Treasury yields, the fourth quarter is a reminder of how quickly the table can re-set.  The disciplined strategies of certain healthcare REITs and the surplus of capital chasing healthcare properties today is testimony to the durability of this relatively stable property class.  With economic and market uncertainty, the reliable cash flows of healthcare properties supported by the steady forces of a growing and aging population, make this sector a strong defensive play in today’s market.

 

Source: Wolf Media USA

Top 3 Trends Driving This Era Of Hyperactive Mergers & Acquisitions

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It seems as if almost every other week a new healthcare megamerger is announced that is supposed to transform the industry.

From Walmart-Humana to CVS-Aetna – to the recent announcement in the Dallas market around Baylor, Scott & White and Memorial Hermann – the continuous message is that disruption has arrived and the walls of traditional M&A are falling down. Last year, there were 579 deals for U.S. healthcare targets, the second highest total on record. Why is healthcare M&A so hot?

In the healthcare industry, companies are using M&A as a strategy to adapt and respond to a rapidly changing industry environment. Faced with a shifting technological landscape, they are looking for outside expertise and systems to remain competitive. And in private equity, which is investing in healthcare at a rapid rate, attractive margins and profitability are driving them to certain healthcare sub-sectors.

A recent survey of 100 healthcare M&A dealmakers uncovered several insights to understand what’s going on in this market. These are the top trends.

1. Economic conditions are ripe for M&A, but attractive healthcare targets are scarce

A strong economy and low interest rates have significantly improved access to capital. Many companies have paid down debt, stockpiled cash, and are now in a position to spend. From a dry powder position, conditions are ideal for healthcare organizations to evolve through acquisitions, though increased access to capital has created more competition and pushed multiples to all-time highs.

As a result, the shortage of financially attractive acquisition targets is currently the biggest challenge in healthcare M&A. These challenges – high valuations, excessive competition and short timelines for due diligence – have created a seller’s market. The dearth of acquisition targets is further exacerbated by the fact that there simply aren’t many healthcare companies with updated technology/IT systems and additional investment must be factored into the deal model.

2. Heightened competition and prices are spurring healthcare companies to joint ventures

Amid heightened competition and pace of transformation, healthcare companies are turning to joint ventures and alliances to expand into new markets and grow top-line revenue more quickly — and with less hassle than pure M&A. An overwhelming majority of our respondents (79 percent) told us they expect to pursue alliances, partnerships, and joint ventures in the next 12 to 18 months.

While alliances come with their own set of challenges, they allow organizations to realize value earlier by avoiding some of the incredibly challenging and time-consuming aspects of M&A deals, such as fully integrating infrastructures, cultures, and technology. JVs can also be a means of accessing new technology. The most prominent benefits of partnerships and joint ventures, respondents told us, is the opportunity to access outside technology or expertise (57 percent said this). In a world that increasingly favors a digital-first approach, quicker access to new technology could be game-changing for some organizations.

3. Technology is both complicating things and presenting new opportunities

Technology has emerged as one of the central forces – if not the most important force of all – shaping acquirers’ M&A strategies in healthcare. An overwhelming majority of our survey respondents, 93 percent, say technology and systems integration challenges are creating added complexity in the healthcare industry. Also, more than a third of our survey respondents (36 percent) said the fast pace of technological change would pose the greatest challenge to healthcare companies over the next one to three years.

In the context of M&A, this raises the importance of technology and digital due diligence in the targeting phase and makes it critical to plan how acquired companies will be able to adapt, or disrupt, using technology going forward.

To be sure, buyers said they are looking for acquisitions capable of evolving with the rapidly shifting environment – or, those capable of proactively transforming that environment themselves. In that sense, the emergence of new digital tools is seen as a prime opportunity: 48 percent of respondents said one of their top two strategic drivers for making healthcare acquisitions was the chance to disrupt incumbents using technology. And healthcare IT was the subsector most likely to be invested in, prioritized ahead of providers, staffing, and even home health.

A wide range of technologies is seen as having potential to advance the industry. Among our survey respondents, the technologies deemed most attractive were mobile tools (49 percent), data analytics capabilities (37 percent), and the use of blockchain (30 percent). Wearables, sensors and trackers (25 percent), and telehealth tools (20 percent) – all of which intersect with the mobile space – are also drawing interest.

Conclusion

Technology comes with its fair share of challenges, especially integration in a healthcare setting. But it can also fuel an organization’s competitiveness and ability to adapt to disruption in the future. Read the full report, “Reshaping Healthcare M&A: How Competition & Technology are Changing the Game,” to access the complete findings.

 

Source: DBJ