October 2021 Real Estate Newsletter
Healthcare Real Estate Transactions and New Construction
Easterly, Through JV, Agrees to Acquire 1.2 Million SF VA Portfolio for $635.6 Million.
Easterly Government Properties Inc. (NYSE: DEA) announced last Wednesday, October 13th, that it has formed a joint venture (JV) to acquire a 1,214,165 square foot portfolio of 10 properties 100 percent leased to the U.S. Department of Veterans Affairs (VA), for a purchase price of about $635.6 million. The acquisitions, which Easterly says will close “on a rolling basis” by the end of 2023, include three properties in Texas, two in Georgia and one each in Tennessee, Kansas, Alabama, Arizona and Florida. The 100 percent build-to-suit, Class A properties are either recently delivered or under construction, and the average lease term is 19.6 years.
Southeast Gateway Medical Office Portfolio Sold.
The Portfolio consists of eleven medical office properties located in some of the most desirable markets in the Southeastern US. The Properties are concentrated within the Atlanta, Nashville and Charlotte MSAs and benefit from the exceptional, high-growth demographic trends that define the region. The Portfolio is 95% leased with a roster of tenants that is 69% composed of health systems and credit quality physician groups, representing a diverse mix of clinical specialties. Health system tenants within the Portfolio include Piedmont Healthcare, Northside Hospital, WellStar Health System, Emory Healthcare, Children’s Healthcare of Atlanta, Vanderbilt Health, TriStar Medical Group / HCA, U.S. Department of Veteran Affairs, Atrium Health, and Novant Health.
Hammes Healthcare Celebrates Groundbreaking.
Construction has been progressing since 2020, converting a Sears building in Marketplace Mall into an ambulatory surgery center, and the ceremony marked the start of the project’s 4-story outpatient clinical tower. UR Medicine’s new ambulatory orthopedic campus will span more than 400,000 square feet to provide clinical care, education, research, and community wellness. Upon opening in late 2022, the ambulatory surgery center will have eight operating rooms with additional pre- and post-operative rooms to support the most complex orthopedic surgical procedures. The new tow is set to open in late 2023 will house health and wellness and admin spaces.
Healthcare Real Estate Trends
Portfolio Sales Dominate Third Quarter
Since late September there have been multiple sizable portfolio transactions in the healthcare real estate industry. According to Revista portfolio sales represented more than sixty percent (60%) of the $4.6 billion of total MOB sales volume in the third quarter. In addition to the two (2) porfolio transactions mentioned above there were also the following transactions: A portfolio, known as the I-95 Portfolio with properties in Rhode Island, includes twelve (12) assets totaling 573,554 square feet of space was acquired by a Joint Venture of Evergreen Medical Proerties and Bain Capital. A three (3) MOB portfolio in Federick, Maryland was recently acquired by BentallGreenOak. A portfolio of twenty-nine (29) facilities in ten (10) states owned by The Inland Real Estate Group received $220 million in financing for the portfolio that includes 720,000 SF of healthcare space.
Pinnacle Real Estate Group Assessment
Healthcare Real Estate Continues Its Positive Trajectory in 2021.
Now that the third quarter of 2021 has concluded we can look back and confirm that the Healthcare Real Estate Industry is trending upward with a positive trajectory. In our previous newsletters we have mentioned our opinions on this trend and would like to confirm with statistics. The third quarter was a strong for MOBs with a sales total of $4.6 billion, which is the second highest quarterly total since 2015, with first being $4.9 billion of sales in second quarter of 2017. The year-to-date total for 2021 is $9.6 billion, which assumes that the Healthcare Real Estate Industry will once again reach more than $10 billion of sales for seven (7) consecutive years. The trailing twelve-month (TTM) total after third quarter 2021 was $13.7 billion was the highest since first quarter of 2018 TTM sales were $14.6 billion. Overall, we believe that unless the effects of the pending inflation begins to materialize or an unknown critical market issue arises this positive trend will continue through the end of 2021 with the potential for the TTM totals in 2022 quarters to reach 2017 levels over $15 billion.
Christopher Louis, ASA, MAI