Healthcare Real Estate Transactions and New Construction
Medical Properties Trust To Buy 18 Springstone Hospital Facilities for $760 Million
Medical Properties Trust has agreed to acquire 18 Springstone inpatient behavioral health hospitals in a $760 million sale-leaseback deal. The transaction also involves acquiring an interest in Springstone’s operations for $190 million. The seller of the properties is San Francisco-based private equity firm Welsh, Carson, Anderson & Stowe. Louisville, Kentucky-based Springstone provides behavioral health services in its purpose-built, inpatient facilities in nine states, with five in Texas, four in Ohio, two in Arizona and Indiana, and one each in Washington, Colorado, Kansas, Oklahoma and North Carolina.
Steward Health Care to Build New $227 Million Wadley Regional Medical Center
The company is to break ground on a new state-of-the-art hospital just northwest of its current location in Texarkana. The project includes a medical office building while offering full range of hospital services such as orthopedics, cardiovascular, 24/7 emergency room, neurosurgery, maternity care, and other outpatient services. The new hospital will have 123 beds with an option to expand to as many as 291. The project is supposed to be completed around May of 2024. Construction is slated to begin in September of 2021 and take 32 months following. Wadley’s current location will be fully operational as construction takes place.
Renovated Richmond Building Sees Nearly $30 Million Jump in Price
A medical office building in Richmond, Virginia, that sold for $3 million five years ago has traded hands in a $32.5 million deal following a full-scale renovation. Montecito Medical paid about $359 per square foot to acquire Brookfield Commons, a 90,598-square-foot, three-story building located at 6600 W. Broad St. in Midtown. The sale price is a significant jump for a 1977-vintage property that once housed the headquarters of the Virginia Department of Transportation before going into foreclosure in 2014.
Healthcare Real Estate Trends
Medical Office Buildings Make Up Over One-Third of Orange County Office Sales in 2021
Sales volume for medical office properties in 2020 reached nearly $480 million locally, compared to the market’s five-year average of $360 million, annually. Investment in medical office this year is around $180 million, roughly halfway through the year. Nashville-based Healthcare Realty Trust purchased two properties accounting for nearly $60 million in volume in the second quarter. This brings the REIT to around $200 million in acquisitions in Orange County since early 2020. In April, it paid $31 million, or around $544 per square foot, for The Laguna Building in Laguna Hills, California. The property was around 80% leased at the time of sale by a wide range of medical tenants including SimonMed Imaging, Pacific Cardiovascular Associates and Nvision Eye Centers. The seller, Bay Area-based Meridian Property Company, acquired the asset for $19.9 million in 2017. A month later, Healthcare Realty Trust bought the adjacent Saddleback Professional Center for $24.6 million, or roughly $337 per square foot. The property was around 82% leased at the time of sale and is home to a California Bank & Trust office, as well as multiple medical tenants. The property was previously acquired for $15.9 million in 2017.
Pinnacle Real Estate Group Assessment
Premium Prices for Healthcare Real Estate Properties Are Being Realized
What we have noticed over the past few months is that commercial real estate properties within the healthcare industry are receiving premium prices in recent transaction in multiple markets across the country. We believe that the current trend for these higher prices is directly connected to the perception and reality that healthcare entities and their real estate are inherently more stable than other industries and types of properties, especially during the pandemic and the reaction to it that occurred the past sixteen (16) plus months. A collaborative factor that has also contributed to the trend is that a good portion of wealthy entities have experienced unprecedented wealth expansion in the past year and seem anxious to deploy those recent increases into new investment opportunities. We believe this trend will continue through the end of the year or until the expected pending inflation begins to become a reality.
Christopher Louis, ASA, MAI