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Healthcare Realty Trust Looks To Sell $1.1B In Assets

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As part of its pending-yet-imminent merger with Healthcare Trust of America Inc., Healthcare Realty Trust Inc. is currently under contract with five counterparties to sell or joint venture 27 properties totaling $807 million.

For a subset of these properties valued at a total of $673 million, the counterparties have secured their investment committees’ approval or due diligence periods have expired. These transactions are expected to close within 10 days of the completion of the merger, which is expected on or around July 20. The rest of the properties under contract are scheduled to close by the middle of August.

As had been announced previously, the merger consideration includes a stock exchange ratio of 1:1 and a special cash dividend of $4.82 per share to HTA shareholders, totaling $1.1 billion.

HRT expects to fund the $1.1 billion dividend through the above-mentioned $807 million in asset sales and joint venture transactions, as well as 10 properties under letter-of-intent with three counterparties for $295 million, all at a blended cap rate of 4.8 percent.

HRT further announced that it “is also in active discussions with multiple counterparties regarding the sale of additional properties valued at more than $600 million at similar cap rates.”

The asset sales, HRT reported, “refine its portfolio by increasing the percentage of on-campus properties and improving the percentage of properties in top 100 MSAs….”

In a prepared statement, HRT President & CEO Todd Meredith said that with these transactions, the company has secured funding for the special cash dividend at an attractive cost of capital and that it expects to continue to positively shape the combined company’s portfolio and source accretive capital through more asset sales and joint venture investment.

An HRT spokesperson confirmed to Commercial Property Executive that the combined company will keep the Healthcare Realty name and continue to trade under its NYSE symbol (HR).

Finally, HRT stated that it expects to form a new joint venture with CBRE Investment Management. Initially, HRT plans to contribute four former HTA properties, while retaining a 20 percent interest in the joint venture and managing and leasing the properties.

In late 2020, HRT entered into a 50-50 joint venture agreement with TIAA to invest in medical office properties at the pace of about $200 million a year.

And in April of last year, HRT purchased a 57,600-square-foot medical office building in Laguna Hills, Calif., from Meridian for $31.3 million.

 

Source: Commercial Property Executive

Portfolio Of Eleven Medical Office Buildings And Inpatient Rehab Facilities Trades For $240M

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The Sanders Trust and Harrison Street have sold an 11-property portfolio composed of medical office buildings and inpatient rehabilitation facilities.

Lincoln Property Co.—through Lincoln Advisors—spent $240 million to acquire the assets on behalf of a public pension fund client.

Located across Texas, Ohio, Maryland, Georgia, Mississippi and Iowa, the collection adds up to 474,100 square feet. According to a Harrison Street release, nine of the medical office buildings and inpatient rehabilitation facilities, valued at $213 million, were fully leased at the time of sale. CBRE Vice Chairmen Chris Bodnar and Lee Asher worked on behalf of the sellers.

The portfolio includes Encompass Health Rehabilitation Hospital of Austin, situated at 330 West Ben White Blvd. The 60-bed inpatient rehabilitation hospital previously traded in 2017, public records show.

Harrison Street has been quite active recently. The company, in partnership with Meridian, spent $43 million to acquire a 110,400-square-foot office building in Irvine, Calif., at the beginning of September. The joint venture plans to transform the space into Class A medical office and rebrand the property as Pacifica Medical Plaza.

 

Source: Commercial Property Executive

Healthcare Is Entering A New Era Of Medical Office Development

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Meridian CEO John Pollock uses three words to describe the biggest trend in healthcare real estate at the moment: outpatient, outpatient, outpatient.

“As healthcare enters a new era, companies providing more outpatient services are on an upswing,” Pollock said. “We are in an era of tremendous growth in outpatient services,” Pollock wrote in an email to Bisnow. “In fact, we are so sure that outpatient services is where the industry is headed that this sector is nearly our singular focus at Meridian. I believe that as healthcare systems provide more care in a lower acuity setting, they will be able to provide a better experience for patients and at a lower price.”

Healthcare is undergoing a tremendous transformation. Healthcare is adjusting, evolving and growing rapidly as baby boomers continue to retire, millennials and Generation Z mature, and technology continues to shape the healthcare space.

“Now more than ever, bigger players and more money — especially from institutional investors — are entering the industry, CBRE First Vice President Angie Weber said. “These large providers have really taken over and the independent physician has become a thing of the past,”

Weber and Pollock are speaking at Bisnow’s National Healthcare West event June 20. Because of the growing population and the fact that most everyone at one time or another gets sick, healthcare is seen as a safe and resilient investment.

“It’s very safe and strong,” Weber said. “But it’s very expensive. The cost of managing staff and patients, tenant improvements and construction are very high.”

Outpatient demand is driving the development of medical office buildings greater than 150K SF, according to a JLL report released in May.

“No area of growth in healthcare is higher than outpatient services,” Pollock said.

There are currently 44 medical office developments larger than 150K SF under construction in the U.S., according to the report. The projects, estimated at $5.3B worth of investment, total nearly 11M SF and represent 22% of all medical office projects underway, the report states. Of the 44 projects, five are 450K SF or more, one is in the 350K SF to 449K SF range, eight are 250K SF to 349K SF, nine are 200K SF to 349K SF and 21 developments are 150K SF to 199K SF.

“This new trend is a function of the well-recognized growth in outpatient care with its focus on the patient experience and physician convenience with critical services and specialties housed under one roof, with the added goal of accountable care in a lower cost setting,” the report states. “The timing couldn’t be better given the surge in capital seeking investment opportunities in healthcare given the quality of tenancy and durability of medical office properties.”

Weber said the outpatient trend is being driven by a combination of demands from patients and medical providers. Many people, especially millennials, don’t like visiting a hospital for treatment.   Medical providers also find that it costs more to do certain medical procedures in a hospital than an outpatient setting.

“Along with preventive care options, medical providers are opening more specialized healthcare facilities, such as those that offer treatment for depression or post traumatic stress disorder and behavioral and mental health facilities,” Weber said.  “We’re going to see more of that,” she said. “I think you’re going to see these outpatient clinics in all shapes and sizes.”

 

Source: Bisnow