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Three Healthcare Real Estate Professionals Launch Capital Healthcare Properties And Form Partnership With HSG Medical To Develop And Acquire Medical Office Buildings

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Three experienced commercial real estate professionals serving a niche in the national medical office building (MOB) sector have formed Capital Healthcare Properties to address the needs of leading healthcare systems, physician groups and specialty providers.

Daniel Ahlering, Jack Sullivan and Jay Heald, the firm’s founding principals, have also formed a programmatic joint venture partnership with HSG Medical, an affiliate of Hubbard Street Group, to facilitate and launch new development and acquisition initiatives.

Ahlering, Sullivan and Heald will draw on their recent experience with a Chicago-based MOB developer where they completed more than one million square feet in new developments and leasing assignments and earlier within the capital markets and tenant representation groups at JLL. Capital Healthcare Properties provides a comprehensive menu of services ranging from ground-up development to acquisitions to leasing of owned and third-party assets. On the development front, the joint venture will target medical office buildings ranging from 20,000 to 100,000 square feet.

“Our primary goal in forming Capital Healthcare Properties is to leverage our collective experiences, resources and relationships to lessen a client’s real estate burden. This allows them to focus on providing tremendous patient care, their core business,” said Jay Heald, Managing Partner, Capital Healthcare Properties.

In partnering with HSG Medical, Capital Healthcare Properties will draw on the experiences and expertise of the two HSG Medical Principals, John McLinden and Kage Brown. Combined, the Principals of HSG Medical have over 45 years of national real estate development experience and have developed over 12.5 million square feet and 5,000+ residential units, exceeding $3 billion in aggregate capitalization for these projects.

“Strategically we believe the health care industry represents a huge growth opportunity for commercial real estate,” said Kage Brown, Principal, HSG Medical. “In the aftermath of the pandemic, medical offices remain one of the most resilient and recession-resistant commercial real estate sectors, with low correlation to greater economic and geopolitical trends.”

HSG Medical will provide capital, investment oversight, accounting and administrative services along with office space for the joint venture. The partnership will operate independently from Hubbard Street Group.

The principals’ resume of involvement in new development projects includes work with Northwestern Medicine, Advocate Health, Northwest Community Hospital, HonorHealth and The CORE Institute, among others, in Illinois and Arizona. The development projects, with varying degrees of complexity, range in size from 20,000 to 180,000 square feet. Further, several projects were awarded national and regional awards for development excellence. Specific project highlights include:

• Oak Brook Commons, a 180,000-square-foot ground-up development for Northwestern Medicine that was completed in the fourth quarter of 2022 and is located in Oak Brook, Ill.

• NCH Buffalo Grove Outpatient Care Center, a 71,000-square-foot ground-up development for Northwest Community Hospital that was completed in the third quarter of 2021 and is located in Buffalo Grove, Ill. The project has been recognized for excellence by a variety of healthcare and real estate organizations.

• Mercy Medical Commons II, a 60,000-square-foot ground-up development anchored by The CORE Institute that was completed in mid-2020 and is located in Gilbert, Ariz. The project has been recognized for excellence by a local real estate media outlet.

“Delivering successful outcomes is all about relationships, tactical execution and regular communication during all phases of a client project,” said Dan Ahlering, Managing Partner, Capital Healthcare Properties. “Our collective experiences and contacts in the industry, and our partnership with HSG Medical, give us the tools and insights to uniquely serve our clients and redefine the client-service provider relationship.”

The Healthcare Environment

Despite many issues facing the healthcare sector—labor shortage/costs, supply chain issues, inflation and reimbursement pressure, etc.—there remains a tremendous need and appetite for outpatient medical office investment and development. This is due to a variety of market forces that include a shift in patient care preferences away from hospitals to outpatient and ambulatory surgical centers.

The shift already was occurring with policy/regulation changes, purchaser preferences, innovation and a lower provider operating cost, and then was exacerbated during and post-pandemic.

Outpatient facility revenue is estimated to be approximately 50% of hospital revenue and those facilities provide a lower cost basis versus inpatient or HOPD sites. According to Kaufman Hall and JLL, outpatient revenue grew by 8% in 2022. Further, the JLL report says outpatient demand for ages 55+ alone is forecast to grow 16.9% by 2025.

“Hospitals, healthcare systems and physician groups recognize the need to invest in their outpatient strategy, especially as the healthcare environment, business climate and patient preferences constantly evolve,” said Jack Sullivan, Managing Partner, Capital Healthcare Properties. “We’ll make those investments more sound because of the depth of resources we bring to each assignment.”

 

Source: HREI

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Medical Office Building Mergers, Acquisitions Up 14% In First Quarter 2023

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Medical office building mergers and acquisitions were up 13.7 percent in the first quarter of 2023 and up 5 percent from the same period last year.

Medical office building spending increased by 21.3 percent over the last quarter, hitting $991 million in the first quarter, according to an April 14 press release.

The largest medical office building sale with a disclosed price in the first quarter was for $190 million.

Tennessee saw the highest number of mergers and acquisitions in quarter one with 11 deals, followed by California, Illinois, Florida and Texas.

Montecito Medical was the busiest acquirer in the market, obtaining 261,307 square feet of property across the country. The real estate investment firm’s most expensive transaction of the quarter reached $48 million.

 

Source: Becker’s ASC Review

Surgery Partners Plans To Acquire $400M Worth Of Properties On 2021 And Five Other Insights

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Nashville, Tenn.-based Surgery Partners reported $1.9 billion in 2020 revenue but still posted a net loss of $155.6 million on the year.

Company leaders discussed performance in an earnings call transcribed by The Motley Fool on March 10.

Wayne DeVeydt, executive chair of the board, on how Surgery Partners has changed in response to COVID-19: “Our business model was pressure-tested in 2020 and has proven to be resilient. Our results in this challenging environment give us confidence that the company we built should support sustainable, long-term double-digit growth in 2021 and beyond.”

Mr. DeVeydt on the growth of total joint replacements: “Joint replacements in our ASCs were up 110 percent as compared to the prior year quarter and for the year. Even with the disruption of COVID, joint replacements in our ASCs have increased by approximately 96 percent.”

Mr. DeVeydt on Surgery Partners’ goals in 2021: “In 2021, we are now ready to move on the offensive and capitalize on the $150 billion total addressable market that we believe we are uniquely positioned to capture. … This dry powder gives us the ability to aggressively pursue our growth agenda, while maintaining our disciplined approach to capital deployment that [CEO Eric Evans] will speak to in more detail.”

Mr. Evans on physician recruitment: “Year to date, we’ve recruited over 560 new physicians who generated 15 percent more revenue per case as compared to the 2019 cohort. But, the success of our recruiting program is not just a function of our most recent additions.”

Mr. Evans on the specialties Surgery Partners is targeting for success: “Over multiple years, we have also been making investments in expanding our musculoskeletal footprint and more recently in expanding our presence in cardiology, as we think about longer-term opportunities. We have invested in these areas because of their large and growing addressable markets. Specifically, we estimate that there is over $60 billion of cases that will shift from inpatient to outpatient over the next several years. And, we estimate that over 60 percent of those procedures are in musculoskeletal and cardiology.”

Mr. Evans on acquisitions: “We believe we are in a strong position to further expand our portfolio in 2021, and we have the financial capacity to execute on over $400 million of transactions. … We believe that the pandemic has fundamentally changed the way patients, surgeons and health plans will think about the role that purpose-built short-stay surgical facilities will play in healthcare delivery, which continues to drive the shift of surgeries to our facilities. This has been our company’s differentiation strategy and now more than ever, our value proposition is resonating with key stakeholders in the healthcare environment. We remain very confident in our long-term organic growth model and believe that scaled independent operators, such as Surgery Partners, are uniquely positioned to grow in this new marketplace.”

 

Source: Becker’s ASC Review