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Rising Rates, Costs Catch Up With The MOB Development Market

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Although 2022 was generally considered to be a tough year for healthcare real estate developers – the result of rising construction costs and inflation – the amount of medical outpatient building space started or completed fell only 1.1 percent from the previous year.

That was indeed a bit of a surprise last year when the Arnold, Md.-based research firm Revista issued its 2023 Outpatient Real Estate Development Report, which indicated that the volume of MOB projects started or completed in 2022 totaled 44.9 million square feet in 2022, down slightly from the 45.4 million square feet of space started or completed in 2021.

However, it looks as if increasing costs, rising interest rates, harder-to-obtain debt and financially challenged health systems caught up with the MOB development business in 2023.

The newly released 2024 Outpatient Real Estate Development Report provides a wealth of information on medical office and other outpatient properties started and completed in 2023 by third party developers. The report provides a ranking of total number of projects, total square feet and total construction value for the top developers.

 

Source: HREI

Healthcare Realty Trust Announces $338 Million Of Fourth Quarter 2023 Asset Sales

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Healthcare Realty Trust Incorporated just announced the completion of $338 million of asset sales during the fourth quarter of 2023 bringing full year additional dispositions to $656 million at an average cap rate of 6.6%.

The full year additional dispositions resulted in proceeds of $597 million as well as $59 million of seller financing across three transactions, including $14 million of seller financing in the fourth quarter. Proceeds were used for general corporate purposes, including the funding of development commitments and repayment of debt. Healthcare Realty had no outstanding balance on its revolving credit facility as of December 31, 2023.

The 2023 additional dispositions of $656 million do not include the $112.5 million of asset sales in January 2023 that fully repaid the July 2022 merger-related special dividend.

Healthcare Realty is a real estate investment trust that owns and operates medical outpatient buildings primarily located around market-leading hospital campuses. The company selectively grows its portfolio through property acquisition and development. As the first and largest REIT to specialize in medical outpatient buildings, Healthcare Realty’s portfolio includes more than 700 properties totaling over 40 million square feet concentrated in 15 growth markets.

In addition to the historical information contained within, the matters discussed in this press release may contain forward-looking statements that involve risks and uncertainties. These risks are discussed in filings with the Securities and Exchange Commission by Healthcare Realty Trust, including its Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Risk Factors,” and as updated in its Quarterly Reports on Form 10-Q filed thereafter. Forward-looking statements represent the company’s judgment as of the date of this release. Healthcare Realty disclaims any obligation to update forward-looking statements.

 

Source: HREI

GI Partners Launches Health-Care Investment Platform

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Private alternative investment firm GI Partners is establishing UDLR Healthcare, a venture which will focus on investing in medical outpatient buildings.

The platform is a partnership between GI Partners and a team of former executives from Healthcare Trust of America.

The focus of the new partnership will be on medical outpatient buildings located in key markets, near demographic growth centers, as well as adding value through capital improvement. An initial property investment is set to close this month.

Previous HTA CFO Robert Milligan will lead UDRL Healthcare and will serve as the platform’s CEO. He will be joined by former HTA executives Todd Sloan, Olivia Waalboer, Jeff Spiller and Austin Brooker.

Joyce Chow, Principal at GI Partners, said in prepared remarks that the decision to create the platform comes as a result of increasing demand for high-quality medical facilities. In July 2022, HTA merged with Healthcare Realty Trust Inc.

Founded in 2001, GI Partners raised more than $42 billion in capital since its inception and has a real estate strategy that focuses on specialized domains, including technology, sciences and health-care properties.

According to CommercialEdge, the company has a footprint of approximately 11.4 million square feet, with investment mostly focused on office building assets, life science buildings and a few medical office properties acquired before launching the UDLR Healthcare platform. Among those is the 140,913-square-foot uCity Square, a Class A medical office in Philadelphia, purchased in 2021 for $79.5 million.

Investment Opportunity In Health-Care Real Estate

What used to be an alternative asset class, MOB is now considered a mainstream investment sector. The asset is recession-proof and despite a lower transaction volume compared to the previous years, medical outpatient properties have a low vacancy rate with stable tenants.

In a recent MOB Outlook series, experts weighed in on the state of health-care investment. Owners are looking to broaden their portfolios and despite the influence of macroeconomic factors, there is a general confidence that the sector will continue to fare well in the upcoming year.

 

Source: CPE