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Physicians Realty Trust Announces Agreement To Purchase Medical Office Portfolio For $764 Million

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Physicians Realty Trust, a self-managed healthcare real estate company, announced today that the Company, through its operating partnership, Physicians Realty L.P., a Delaware limited partnership, has executed a Master Transaction Agreement for the acquisition of 15 Class-A medical office buildings located in eight states, comprising approximately 1,460,000 square feet, for an aggregate purchase price of approximately $764.3 million, subject to closing prorations and other adjustments.

The Pending Acquisitions

The portfolio is approximately 95% leased with a weighted average remaining lease term of approximately 7.4 years. Each of the 15 buildings are either located on a health system campus or are affiliated with a health system, and approximately 74% of aggregate leased space is attributable to investment grade health systems or their subsidiaries. Upon closing, the first year unlevered cash yield of the portfolio is expected to be 4.9%. The Company expects that the transaction will be completed in the fourth quarter of 2021.

At closing, the Company anticipates funding the purchase of the Pending Acquisitions through the issuance of units of the Operating Partnership, the assumption of indebtedness on certain properties, the satisfaction of existing mezzanine loans outstanding, and proceeds from its unsecured line of credit.

The Master Transaction Agreement contains customary representations, warranties and covenants of the parties. The Pending Acquisitions are also subject to the satisfaction of certain conditions to closing, including the waiver of health system purchase rights with respect to certain properties. There can be no assurance that any or all of the conditions to closing will be satisfied or, if satisfied, that the Operating Partnership will complete the Pending Acquisitions, or effectuate the closing in a timely manner or at all.

About Physicians Realty Trust

Physicians Realty Trust is a self-managed healthcare real estate company organized to acquire, selectively develop, own and manage healthcare properties that are leased to physicians, hospitals and healthcare delivery systems. The Company invests in real estate that is integral to providing high quality healthcare. The Company conducts its business through an UPREIT structure in which its properties are owned by Physicians Realty L.P., a Delaware limited partnership (the “Operating Partnership”), directly or through limited partnerships, limited liability companies or other subsidiaries. The Company is the sole general partner of the Operating Partnership and, as of June 30, 2021, owned approximately 97.6% of the partnership interests in the Operating Partnership (“OP Units”).

Investors are encouraged to visit the Investor Relations portion of the Company’s website (www.docreit.com) for additional information, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, press releases, supplemental information packages and investor presentations.

 

Source: HREI

Allianz Lends $234M For MOB Portfolio Acquisition

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In a $620.4 million deal, Nuveen Real Estate and NexCore have acquired a coast-to-coast portfolio of health-care and life science properties encompassing nearly 1.2 million square feet. The seller was IRA Capital.

The majority of the portfolio is a diversified group of 27 health-care assets that traded for $463 million. The portfolio encompasses properties in multiple states: Arizona, California, Florida, Illinois, Michigan, North Carolina, New Jersey, New York, Pennsylvania, Texas and Wisconsin.

Totaling nearly 750,000 square feet, the properties range from medical office buildings, micro-hospitals and ambulatory surgery facilities to cancer treatment centers. NexCore Group joined Nuveen Real Estate in underwriting the deal and will manage the assets.

The health-care portion of the transaction was led by Nuveen Real Estate’s new U.S. Cities Office Fund and brings the value of the firm’s holdings in the sector to more than $1 billion. Andrew Pike, head of health-care, cited the firm’s plans for aggressive growth in the sector.

Allianz Real Estate provided a $234 million loan toward the medical office acquisition. The loan will provide 51 percent of the total acquisition price, and the sponsors will have $228.9 million of equity in the transaction. The deal is structured on a seven-year term with a fixed-rate tranche of $163.8 million (70 percent) and a floating-rate tranche of $70.2 million (30 percent).

The portfolio is 99 percent occupied by 38 tenants, of which 92 percent are investment-grade credit healthcare systems. The portfolio rent roll has a weighted average unexpired lease term of 12 years, providing for a reasonable lease rollover profile during the loan term, according to Allianz.

Twenty of the 27 properties are in Certificate of Need (CON) states, where local governments require an extensive approval process to demonstrate a need for new healthcare facilities, providing high barriers to entry and regulatory restrictions around new supply.

Medical Sector Recovers

In a prepared statement, Mike Cale, co-head of U.S. Debt, Allianz Real Estate, U.S., said:  “The pandemic has emphasized the need for improved access to health-care. That trend has been illustrated by the demand for both outpatient facilities and hospital space for acute care. The medical office sector represents a unique, resilient asset class.”

This transaction marks Allianz’s second U.S. debt deal with Nuveen Real Estate, following Allianz’s $94 million financing of a six-property industrial portfolio for Nuveen’s U.S. Cities Industrial Fund in 2020.

The lack of demand for routine care and limitations on elective procedures, both in response to the COVID-19 pandemic, contributed to a 6.4 percent loss in health care employment in 2020, according to an April report from CBRE. That loss, however, was much less than in the overall economy, and health care jobs are rebounding rapidly.

Medical office buildings showed similar resilience, with annual investment volume falling by just 12.7 percent, the smallest decline for any major product category. Meanwhile, medical office property sales volume jumped in the fourth quarter of 2020, as cap rates continued a decade-long decrease.

Also part of the deal is the $157 million acquisition of two life science properties in Madison, Wis., and Orange County, Calif. Fully leased to three tenants, the assets comprise 420,000 square feet and will add to Nuveen’s 4 million-square-foot life science portfolio. The properties were acquired via TIAA’s balance sheet, according to Nuveen Real Estate.

Since November 2020, Nuveen and NexCore have teamed up on transactions valued at $687 million, noted Todd Varney, NexCore’s chief development officer & managing partner. The assets include 34 buildings totaling 1.4 million square feet, along with 200,000 square feet in development.

 

Source: Commercial Property Executive