The acquisition, finalized on March 22, 2024, encompasses nine properties located across New Mexico, Arizona, Georgia, Colorado, Mississippi, Texas, and Alabama. This expansion contributes to NDH REIT’s total portfolio, which now comprises 174 locations across 21 states.
Months after forming a $1.5 billion strategic partnership to invest in healthcare real estate across the United States, National Real Estate Advisors LLC and Catalyst Healthcare Real Estate have purchased two multi-state portfolios for $420 million.
The portfolios are 92 percent leased and consist of 40 properties totaling 1.2 million square feet spanning 13 states. Most of the assets are medical office buildings and 88 percent of the total leased space is comprised of health systems and regional physician groups. They were acquired from different unidentified sellers in transactions that closed this month and in December.
The properties are located in: Alabama, Arkansas, Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Tennessee, Texas and Florida.
In a prepared statement, Jeffrey Kanne, president and CEO of National said: “The acquisitions significantly scale the investment manager’s medical office portfolio and furthers its geographic diversification. The transactions also underscore National’s commitment to invest in highly competitive, diverse markets for its clients.”
National’s investment portfolios include apartment, office, mixed-use, medical, industrial, data centers and hotel assets. In December 2020, National was part of joint venture that sold the majority ownership interest in a three-building, 620,000-square foot life sciences campus in Cambridge, Mass., for $720 million.
Alabama, Arkansas, Connecticut, Florida, Louisiana, Tennessee and Virginia are new MOB markets for National. One of the assets acquired is Physicians Regional Pine Ridge multi-tenant medical office building, a 108,337-square-foot MOB property in Naples, Florida.
In prepared remarks, Chad Henderson, founder and CEO of Catalyst, a national, full-service healthcare real estate investment firm, said: “The closing of the portfolios was a significant first step for the joint venture. Formed in early November, the venture strives to positively impact healthcare delivery by investing strategic capital with a partnership-like mentality. The transactions further Catalyst’s commitment to build on meaningful relationships within healthcare.
When National and Catalyst announced the joint venture on Nov. 2, the partners said they had already closed on three to-be-developed assets and expected more deals to close by the end of 2021. The first three joint venture developments were: a 74,640-square-foot in-patient rehab facility for PAM Health in Miamisburg, Ohio, with 42 in-patient rehabilitation beds and 20 long-term care beds; a 51,500-square-foot inpatient rehab facility for PAM Health in Venice, Florida, with 42 in-patient rehabilitation beds; and a 23,700-square-foot medical office building for Dupont Hospital in Fort Wayne, Indiana.
Source: Commercial Property Executive
An influx of medical office investors is good news for ASC operators, according to John Nero, a director of the healthcare-focused investment banking firm Hammond Hanlon Camp.
Mr. Nero told Becker’s ASC Review how ASCs could be affected by medical office transactions — and play a role in them.
Question: What should ASC operators know about the medical office building market and activity right now?
John Nero: The medical office market continues to see an influx of new capital providers regularly, including private equity, institutional and offshore capital. These investors continue to create a market imbalance where capital outweighs the supply of quality medical office and ASC product, which bodes well for ASC operators that own their facilities and may want to evaluate opportunities to partner or sell in a favorable market environment.
Question: Every week, there are new transactions involving medical office buildings that have ASCs. Why do you think we see these kinds of facilities changing hands? Is it normal or noteworthy?
John Nero: Medical office buildings with ASCs tend to be viewed favorably, particularly when dealing with facilities located within certificate of need states, where the ability for the tenant to move the ASC is limited and the development of new competitive product is often restricted. While ASCs are specialized uses that cost a landlord more tenant improvement dollars compared with a more traditional medical office user, they also generate higher rents and have higher renewal probabilities upon lease expiration. Having an ASC in a multi-tenant building may also help attract physicians who perform cases to lease their office space there.
Question: What do medical office building operators prioritize when selecting a strategic capital partner?
John Nero: The top three factors medical office building operators look for when selecting a strategic capital partner are:
1. Alignment On Scale Expectations —This may be the most important element of creating a successful joint-venture partnership within any real estate sector, but in healthcare, it is particularly important. Some institutional capital providers can have unrealistic expectations of scale and capital deployment in this space. Most operating partners want to align with capital partners that are fairly well-educated on the nuances of the outpatient facilities sector, so that both sides understand what level of scale is realistic within the established investment strategy and defined timeframe.
2. Competitive Advantage — Every investor is seeking a competitive advantage, and this goes for both operators and capital providers. Operators are obviously looking for competitive economics in their joint-venture structures, whether it’s a favorable promote structure or eliminating requirements on crossing multiple investments within a program. They may also seek a sourcing advantage from their capital, as many private equity capital providers also have strategic investments in healthcare operating businesses (such as ASCs) that may surface off-market real estate opportunities.
3. Speed And Efficiency — Most medical office building operators see a tremendous amount of deals on a regular basis. As such, they need to be aligned with a capital partner that can respond quickly on whether or not to pursue opportunities in today’s competitive marketplace. The old mantra that “A fast ‘no’ is the next best answer to a ‘yes'” rings true here. Most new arrangements we’re advising on have some type of “three strikes” policy, whereby the capital partner can decline up to three opportunities that fit predefined criteria before the operator can pursue the transaction through another capital vehicle.
Source: Becker’s ASC Review
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