Posts

Micro-Hospitals Continue To Make Inroads In US Healthcare

/in , , /by

Sila Realty Trust just announced completion of an $85.5 million healthcare portfolio acquisition whose assets were either micro-hospitals or a facility to offer similar services. It was the latest illustration of the continued growth of this healthcare trend.

The portfolio, located in Arizona and Texas, comprise four built-to-suit micro-hospitals and one freestanding emergency department, totaling approximately 158,000 square feet on a combined 17.5 acres. Each of the micro-hospitals is licensed for 8-inpatient beds, and offers a 13-bed emergency department, operating room, laboratory, diagnostic imaging suite, and a pharmacy. The freestanding emergency department is a 13-bed full-service emergency center, constructed to also offer the same services as the micro-hospitals.

Micro-hospitals have been growing in importance for at least a half dozen years. They are inpatient facilities with a handful of short-stay beds offering some of the same services as larger hospitals—typically emergency services, imaging, pharmacy, lab work and sometimes even outpatient surgeries and primary care—but are cheaper to operate.

Healthcare loves them and their ability to offload demand from large institutions while surgically, if you will, addressing markets. Net lease loves them for their ability to expand need for real estate in areas that might not be able to support a major hospital.

A new example is the micro-hospital expected to open next month in Bellevue, Wisconsin. The Green Bay ER & Hospital is run by Nutex Health, a Houston-based company. It will have six overnight beds and have an emergency department as well as imaging and lab services. There are inpatient and outpatient suites, including pediatric rooms and separate isolation rooms, but no operating rooms.

“We want to start smaller and grow with the community,” facility administrator Sonja Hansen told the Green Bay Press Gazette. “Whether 10 people come through the day or we have 30, we can meet those needs.”

ChristianaCare, which operates three hospitals in northern Delawareand the surrounding area, is expanding into southeastern Pennsylvania through a joint venture with Emerus Holdings, reported the Delaware Business Times. The JV will open three micro-hospitals by 2025 with health and wellness centers and potentially primary care, outpatient diagnostics, and other specialty services.

 

Source: GlobeSt.

BayCare Health System Acquires Winter Haven’s Gessler Clinic

/in /by

BayCare Health System, Central Florida’s largest non-for-profit healthcare provider, is acquiring Gessler Clinic, Winter Haven’s physician-owned health care clinic, effective December 2.

“Gessler’s long-standing dedication and high-quality service to its patients make it a natural fit to expand BayCare’s commitment to the community,” BayCare Co-Chief Operating Officer Lou Galdieri said in a release. “This transition underscores a mutual vision to elevate health care delivery in Winter Haven and Polk County.”

Winter Haven Hospital already falls under the BayCare umbrella of healthcare centers, and works alongside Gessler Clinic to provide care to the residents of Winter Haven and greater Polk County.

“This transition builds on BayCare’s long-standing commitment to Polk County,” says Tom Garthwaite, president of Winter Haven Hospital.

BayCare Health System includes hospitals and locations for physicians and ambulatory services in the Central Florida area. Gessler Clinic has been serving the Winter Haven community since 1957 and includes more than 40 physicians in 20 specialties.

“Polk County is a large and growing county that deserves the very best in health care offerings,” Garthwaite continues. “This medical practice transition is about meeting the growing community’s access to health care. We are excited to be expanding our network’s primary care physician and specialist network.”

Garthwaite says they are working to ensure a smooth transition for patients.

Gessler Clinic’s main location is directly across the street from Winter Haven Hospital, and many providers already practice at both Winter Haven Hospital and Winter Haven Women’s Hospital. The two hospitals joined the BayCare System in 2013, adding not only acute care facilities to the health system but also outpatient behavioral health services, a community blood center and primary care practices.

“The transition allows us to continue our work on improving the health of all we serve by providing high-quality, compassionate care,” Garthwaite says. “Joining forces with Gessler will expand our extraordinary team and ultimately benefit our community. This will provide a great foundation for future physician growth and alignment. BayCare values our relationships with thousands of physicians across our region and often have conversations about how we might more closely align to better serve our patients and communities.”

“As a physician, you want nothing more than to take good care of your patients,” said Richard LaCalamito, D.O., a member of the Gessler Clinic since 1996. “With this transition, our community’s health will remain the driving priority of this clinic.”

In 2022, BayCare was named among the nation’s top 20% of health systems for clinical and operational excellence by FORTUNE/Merative for the fourth year in a row.

Also under the BayCare umbrella are Bartow Regional Medical Center and a Winter Haven-based urgent care center. Additionally, they opened two additional urgent care centers in surrounding cities, expanded specialty and primary care services, and established a family medicine physician residency program.

Most Gessler providers and team members will join BayCare, according to BayCare, and the group will take over operations on Dec. 2.

 

Source: Central Florida healthnews

stethoscope with graphs and currency_canstockphoto100865763 800x533

Why MOBs Offer Healthy Investor Appeal

/in , /by

The health-care sector has largely rebounded from the lockdowns that halted all but the most necessary doctor’s visits and procedures in 2020.

Most health systems reported that they were within 5 percent of pre-pandemic utilization volumes last year, according to Cushman & Wakefield’s most recent healthcare and medical office report.

That’s good news for medical office real estate, as is the expected 7.3 percent growth in outpatient services through 2026, reported Cushman & Wakefield, citing data from the Advisory Board, a healthcare research and analytical organization based in Washington, D.C.

Additionally, medical office buildings have an average occupancy rate of 92 percent, which represents gradual improvement since occupancy dipped in 2020. It’s also clear that while the growth of telehealth fulfilled a need during the lockdown, many ailments and checkups still require an in-person visit. Investors expect MOBs to register 2 percent to 4 percent rent growth this year, according to a JLL survey released in February. That would be consistent with the past two years, which have produced average rent increases of about 2.3 percent, JLL notes, and compares favorably with the 1.9 percent uptick for office rents over the same stretch.

As a result, investors are viewing medical office as a safe haven in a disrupted environment. Not only have rising interest rates cast general uncertainty on property values, but the slow return of employees to the workplace is also raising questions about demand for the office sector as a whole.

“We’re receiving a lot of calls from office owners who are looking for ways to deploy capital into medical office,” said Andrew Milne, senior managing director for JLL Capital Markets. “It isn’t a new trend, but a lot more are rethinking their traditional office portfolios.”

As with most asset categories, higher capital costs have made it challenging to deploy capital into medical office. MOB investors pulled back in the second half of 2022 as the bid-ask spread emerged and lending largely dried up, noted Lorie Damon, an executive managing director with Cushman & Wakefield’s health-care advisory unit. Still, the market remains liquid for trusted borrowers who bring attractive deals to the table.

“The limited capacity for accessing debt right now has certainly impacted medical office as well as every other property sector, but deals are getting done,” said Damon. “Health-care performs really well in recessionary times, because people still get pregnant and still get sick.”

Pressure On Values

Some $19.3 billion in medical office buildings traded in 2022, a $1 billion increase over the prior year, according to New York-based MSCI Real Assets. However, it’s worth noting that a single deal, Healthcare Realty Trust’s acquisition of Healthcare Trust of America, accounted for nearly $8 billion of that total. In the second half of 2022, rising capital costs and recession fears cut MOB transaction volume sharply year-over-year.

Though that REIT deal was a dominant factor in investment volume, private buyers accounted for 72 percent of all transactions in 2022, reported MSCI Real Assets. Health-care REITs pulled out of the market early last year as stock prices fell, observers say. The REITs ended the year down more than 22 percent, according to NAREIT, although they generated total returns of nearly 13 percent in January.

Sources: Revista, CBRE Econometric Advisors, CBRE research

Sources: Revista, CBRE Econometric Advisors, CBRE Research

The dive in health-care REIT values further indicates that a repricing is underway and trickling down to the private market. The median cap rate for medical office ticked up to 5.9 percent by the end of the year, according to research by CBRE and Revista. Gauging true value change is difficult, however, because core asset owners who may have wanted to dispose of properties last year ended up holding onto them, limiting the dataset to value-add and core plus transactions, Cushman & Wakefield noted.

“But in San Francisco, cap rates for surgery centers with credit tenants have climbed to as much as 6.5 percent, or about 200 basis points higher than before the pandemic,” said Edward Del Beccaro, executive vice president and the San Francisco Bay Area regional manager with TRI Commercial/CORFAC International.

Many sellers still hope that interest rates will come down and that prior pricing power returns, he added, but he anticipates that the Federal Reserve will raise the benchmark federal funds an additional 100 basis points in 2023.

“Medical office cap rates will be under further pressure to move higher, and I don’t see them going down at all in 2023,” Del Becarro predicted. “But as inflation is tamed and the market settles out, I think medical office will be one of the winners.”

Stabilizing Market

Some observers anticipate a rebound in investment sales activity this year as debt markets stabilize. After some fluctuation during the fall and winter, the yield on the 10-year Treasury reached nearly 4 percent by the end of February. That has generally translated into interest rates between 5.5 percent and 7 percent or more for medical office. Some lenders had reached capacity as last year drew to a close, but lending has ticked up with new allocations for 2023, reported Warren Hitchcock, senior vice president & managing director with Northmarq.

At the same time, the amount of leverage available has dwindled. But some developers can still find favorable terms. A year ago, Hitchcock secured bank financing for 85 percent of cost for a project that was more than 80 percent preleased. Later in the year, a similar deal still managed to muster a loan for 75 percent of cost.

“Not every lender understands medical office,” Hitchcock added. “But the lenders that do know it and understand it are aggressive on it.”

Lender Interest Grows

“Indeed, just as medical office space is attracting a wider group in investors, more lenders are gravitating toward it,” said Lee Asher, vice chairman with CBRE’s Healthcare and Life Sciences Capital Markets. “Among other attractions, medical tenants deliver solid rent coverage thanks to strong earnings before rent costs and other expenses. What’s more, rent makes up only 5 percent of operating expenses for medical tenants, which is typically much lower than occupiers in other property categories. Because physicians want to remain near their patients, tenant retention also tends to be high.”

Meanwhile, on the equity side, medical office assets that come to the market are still fetching multiple offers even though some buyers are still on the sidelines, reported John Chun, a managing director on JLL’s Capital Markets team. But to those investors who are active, the retreat of treasury rates along with a decline in corporate bond spreads and SOFR swap rates (secured financing overnight rate) are providing more certainty to the market than was present just a few months ago.

“It’s still a very fluid and liquid market,” Chun said. “And we’re starting to see all-in interest rates decrease to a level that should benefit medical office deals this year.”

 

Source: Commercial Property Executive