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Harrison Street Buying Senior Housing Portfolio For $1.2B, Selling MOBs For $371M

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Harrison Street Real Estate Capital is set to acquire a portfolio of 24 senior housing communities for about $1.2B as it sells a medical office building portfolio of about half that size.

The senior living properties, which are mostly in California but also Nevada, are operated by Oakmont Senior Living. The portfolio totals 2,195 units that are mainly assisted living and memory care. The sellers are the Gallaher Cos. and Healthpeak Properties, which each own 12 properties in the portfolio.

The Healthpeak communities are on average 4 years old, with occupancies stabilized at 96% from 2016 to 2019, according to Harrison Street, adding that the Gallaher assets are recently built as well.

“The senior housing sector remained resilient throughout the pandemic and is poised for growth,” Harrison Street Global Chief Investment Officer Michael Gordon said in a statement. “Specifically, the assets we are acquiring are managed by a leading operator in Oakmont and located in attractive markets backed by solid demographics.”

Chicago-based Harrison Street in December raised $720M for a new fund that will focus at least partly on senior housing, Senior Housing News reports. The fund could raise as much as $2B. In February, Harrison Street bought 12 senior housing communities from Healthpeak for $312M.

Harrison Street also said it is selling a 14-property medical office portfolio totaling 833K SF for $371M. The properties, which are in Virginia, Illinois, Minnesota, New Jersey, Oregon, Texas and California, are held by Harrison Street’s core fund and U.S. opportunity funds.

 

Source: Bisnow

Sila Zeros In On Healthcare With $1.3B Data Center Portfolio Sale

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With the sale of a 29-property data center portfolio, Sila Realty Trust is exiting the data center space to focus on healthcare.

Sila sold 29 data center properties to Mapletree Industrial Trust, a REIT listed on the Singapore Exchange, for $1.3 billion. The transaction will be completed in one or more closings during Q3 2021.

“This action marks another key step in Sila Realty Trust’s evolution to provide a clear path for the company to pursue a strategy as a pure-play healthcare REIT,” said Michael A. Seton, Sila CEO and president in a prepared statement.

Sila Realty Trust, previously known as Carter Validus Mission Critical REIT II, owned both data centers and healthcare assets before the sale.

As one example of the type of assets it seeks, last September Sila purchased Tampa Healthcare Facility, a 33,822 rentable square foot medical office building constructed in 2015. The building is located on 2.87 acres in Tampa, the second-fastest growing market in Florida and the twelfth-fastest growing market in the US. The facility, which was 100% net-leased to six tenants at the time of the sale, serves as a strategic location for both primary and urgent care, pediatric spinal care, clinical laboratory services and various types of outpatient surgery.

In the release announcing the sale, Seton said the company was focused on acquiring high-quality, well-located assets with a strong and diverse tenant roster.

“All of these attributes are indicative of our existing portfolio combination and we expect this property will serve as a strong complement to our growing asset base,” Seton said at the time.

It shouldn’t be a surprise that Sila is focusing on the medical sector. It has held up exceptionally well through the pandemic. While medical office buildings sales volume declined in 2020, it was much less of a drop than the other commercial real estate sectors, according to a report from Colliers.

MOB investment decreased 12.2% year-over-year in 2020 to hit $11.1 billion, according to Colliers, while cap rates fell 20 basis points to 6.5%. By comparison, commercial real estate posted a 32% decline in sales volume overall.

 

Source: GlobeSt.

As Medical Office Space Emerges From Pandemic Supply Will Be A Problem

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While medical office buildings sales volume declined in 2020, it was much less of a drop than the other commercial real estate sectors, according to a report from Colliers.

MOB investment decreased 12.2% year-over-year in 2020 to hit $11.1 billion, according to Colliers, while cap rates fell 20 basis points to 6.5%. By comparison, commercial real estate posted a 32% decline in sales volume overall.

Like many sectors, MOB saw an increase in activity in Q4. Sales volume rose from $2.1 billion in Q3 2020 to $3.6 billion. With 67% of total volume in 2020, private equity led the acquisition activity.

On a metro level, Los Angeles led in sales in 2020 at $812 million. It was followed by New York City at $644 million, the D.C. metro at $422 million and Chicago at $401 million.

The west paces in the country in MOB pricing at $374 per square foot. The Midwest and Northeast followed at $331 per square foot and $326 per square foot, respectively. For the Mid-Atlantic, Southwest, and Southeast, pricing ranged between $260 and $300 per square foot.

In Q4, cap rates were lowest in the Southeast at 5.9%. Next was the Southwest at 6.4%. The Northeast posted the highest MOB cap rates at 7.8%. On the best assets, Colliers says sub-6% cap rates were reported for multiple transactions. For instance, a MOB sold in Palm Beach last September 2020 at a quoted cap rate of only 3.9%.

“Cap rate stability reflects the continued desirability of healthcare as it became one of the most essential sectors in 2020,” Colliers said in the report. Investors view it as a relatively safe and durable investment even in times of economic uncertainty. Healthcare real estate continues to be firmly established as a separate asset class within the real estate sector.

As investors look to the asset class this year, they will find that supply is an issue in the medical office sector.

“Apart from new construction, the US MOB market has a relatively limited supply of investable inventory,” according to Colliers. “Healthcare systems and providers hold nearly two-thirds of all healthcare real estate.”

While 30 million new square feet of new medical office space will create upward pressure on vacancy rates in 2021, demand is still projected to outpace supply.

While there might be some conversion of other uses into medical office buildings to increase supply, these transitions are difficult.

“It’s really not that easy,” Pete Bulgarelli, president and CEO of Lillibridge Healthcare Services and executive vice president, office, Ventas, said on CBRE’s ‘The Weekly Take’ podcast.

Medical users have different demands.

“The ways that physicians deliver care and utilize their space is much different than traditional office,” says Christopher Bodnar, vice chairman and co-head of healthcare and life sciences capital markets, CBRE.

 

Source: GlobeSt.