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Moving Away From The Mothership: Satellite Healthcare Campuses Embrace Multimillion-Dollar Expansion, Specialized Services

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When Texas Medical Center-headquartered healthcare systems began acquiring land outside of the Inner Loop, most secured more land than they initially built up.

Many of those satellite campuses are now under multimillion-dollar expansions as they increasingly stand on their own for specialized care rather than as feeder hospitals for the TMC.

Methodist West Campus (Photo Credit: Houston Methodist Houston)

“You cannot innovate from a space perspective in the Medical Center like you can in some of the new hospitals that are located away from the urban core,” Wolff Cos. Executive Vice President Carolyn Wolff Dorros said. “The suburban hospital expansion is transforming these facilities into mini medical centers.”

Swelling Up In The Suburbs

Nearing space capacity at the Texas Medical Center, hospitals turned to Houston’s booming submarkets — Sugar Land, The Woodlands and Katy — for expansion.

 Demand spiked due to the influx in residents, who increasingly prefer healthcare providers and services, from regular checkups to more complex concerns, closer to their home,” Colliers Senior Vice President Coy Davidson said. “There are no longer just feeder campuses for the mothership — the suburban campuses provide top-notch specialized care.”

Most healthcare procedures, excluding services like heart and organ transplants, will be offered at these centers. All of the expansions share one common thread: a desire to offer the same advanced quality service as the flagship hospitals in the Texas Medical Center.

Tracking The Expansion

Houston Methodist System is under construction on two hospital expansions in Sugar Land and The Woodlands. The Sugar Land hospital launched a $60M expansion project to improve its women’s health services in April. The plan includes constructing a three-story, 30,500 SF building and renovating the existing Sweetwater Pavilion. The facility has experienced an increase in patients from communities outside of Fort Bend County, including Waller, Austin, Brazoria, Wharton and Victoria, according to Houston Methodist Sugar Land Hospital CEO Chris Siebenaler.

“Fort Bend continues to be one of the fastest-growing counties in the U.S., which drives the demand for women’s health services,” Siebenaler said.

A rendering of the The University of Texas MD Anderson Cancer Center (Photo Credit: Courtesy of MD Anderson)

The University of Texas MD Anderson Cancer Center is opening a three-story, 208K SF building in The Woodlands. Serving as an extension of MD Anderson in The Woodlands, the outpatient clinic will feature similar treatment and supportive services, plus new diagnostic and screening services.

It is expected to welcome patients in the spring.  What specialized services are being built out is determined by the needs of the area. In Katy, the home of an eight-time state champion high school football team, Memorial Hermann is investing $15M to construct a 50K SF sports and medicine and human performance facility. The project will be on the Memorial Hermann Katy Hospital campus and provide targeted medical care and athletic training for professionals athletes, youth athletes and active adults.

“Another hospital expansion in Katy is providing a cost-saving solution for patients,” Dorros said.

Texas Children’s Hospital West Campus, the first community hospital designed exclusively for children, opened Texas Children’s Urgent Center adjacent to its emergency room in September. Of the 12 clinics for TCH, this is the second to open steps away from one of its hospitals.

“Patients are allowed to come to either facility and be directed to the appropriate facility depending on the severity of the visit,” Dorros said. “Having both options can lower unnecessarily high hospital bills, shorten wait times and increase use of the appropriate healthcare options. That is such a better patient experience, Patients are getting the right care at the right time.”

Learn more about healthcare-related development opportunities at Bisnow’s National Healthcare South event at the InterContinental Houston Medical Center Feb. 27.

 

Source: Bisnow

Diagnosing The Net-Lease Medical Sector

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What do dialysis clinics, urgent care locations, and dental offices have in common?

They are often net lease tenants and together these types of tenants make up the net lease medical sector.

Calkain’s just-released “Net Lease Report: Medical Sector” notes that net lease medical properties can prove to be viable investments, thanks to the following fundamentals.

In-Place Tenants

The main appeal of a net lease medical property is the tenants, which funnel capital into extensive space buildouts and industry-specific equipment. Furthermore, a net lease medical tenant is less likely to up and relocate, as moving X-ray machines, dental equipment and surgical suites can be a costly challenge.

In-Person Healthcare Delivery

Even with telemedicine and virtual healthcare becoming important tools, medical care continues to flourish through face-to-face interaction. The in-person, real-time relationship between patient and physician is difficult to replicate via the internet, meaning a continued need for physical space. Additionally, medical tenants set up shop in specific areas, based on proximity to target populations and lack of competition.

Financial Strength

Net lease medical tenants range from solo dental practices to regional stand-alone urgent care/emergency centers to national specialty clinics. Another aspect tying these businesses together is they are, for the most part, strong financially. A consistent revenue stream adds to the appeal of a net lease medical property.

As with any kind of investment, there are downsides. The net lease medical sector is no exception, and investors need to keep in mind the following.

Empty Space

As mentioned above, relocation is less likely to take place, but this doesn’t mean that it won’t happen. If a healthcare tenant decides not to renew a lease, backfilling the property can be difficult and tenant improvements to convert to general retail purposes can be costly.

Shifting Dynamics

Neighbors Legacy Holdings Inc., which owned and operated Neighbors Emergency Centers, filed for Chapter 11 bankruptcy protection in summer 2018. The year before, six urgent care centers in Southern California filed for bankruptcy protection. Increased competition, changing third-party payer conditions, and increasing overhead costs created financial difficulties for these and other companies. The bankruptcy process can kill a net lease investor’s revenue stream until a judge approves a reorganization plan.

Certainly, there are risks when it comes to owning a net lease medical property and due diligence is essential. The future is bright for the sector.  With advances in medicine, people are living longer and this creates a greater need for healthcare services. The growing demand could push net leased medical facilities to full capacity and lead to a need for additional medical offices, specialty clinics, and urgent care locations. As such, market fundamentals and increasing demand can make medical-sector properties attractive to a net lease property owner.

 

Source: GlobeSt.