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June 2021 Real Estate Newsletter
Posted On: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
Director
720-598-1439
CLouis@AskPHC.comMike Vandaveer
Director
720-599-7883
MVandaveer@AskPHC.comTony Price
Continue reading →
Analyst
720-386-3540
TPrice@AskPHC.comMay 2021 Real Estate Newsletter
Posted On:Continue reading →Healthcare Real Estate Transactions and New Construction
Welltower Announces Completion of Two Generation Medical Office Buildings Leased to Atrium Health.
The two (2) recently developed medical buildings in Charlotte, NC total over 280,000 square feet. The properties were completed in March 2021 and leased to Atrium Health under a 15-year lease. Pappas Properties, LLC is a Charlotte-based developer and strategic partner with Welltower on the planned 9-acre healthcare anchored, mixed-use campus.
BMO Harris Healthcare Real Estate Finance provides a $28.6 Million Credit for Kanye Anderson Real Estate and Remedy Medical Properties.
The portfolio consists of 4 facilities in New Mexico totaling 115,000 square feet and are currently 100% occupied to HealthCare Services, Inc. Kayne and Remedy have acquired 22.7 million square feet of medical office space, containing 571 buildings in 41 states. Together, they are the largest privately held, non-hospital affiliated owners of medical office buildings in the country.
Cincinnati Children’s Hospital Breaks Ground on New College Hill Facility.
The academic acute care children’s hospital has broken ground on a new behavioral health facility. The $99 million building will replace the current inpatient facility and total 160,000 square feet over five (5) stories, which is 68% larger than the current building and will feature private rooms for all patients. The new hospital is scheduled to open late 2023, though it is still $36 million short of its goal.
Healthcare Real Estate Trends – Transactions and Employment are Trending Upward
Montecito Acquires Surgical Facility in Suburban Cleveland.
The facility was an outpatient-oriented surgical medical building in the Cleveland suburb of Beachwood, Ohio. The two-story, 69,800 square foot medical center was built in 2019 and is 100% leased to an operating entity owned predominantly by two market-dominant health systems, Lake Health and University Hospitals. The facility specializes in orthopedics, spine, urology, general surgery, and pain management. The layout includes 8 operating rooms, 2 procedure rooms, and 25 patient beds. The hospital has a staff of more than 200 with 56 operating physicians.
Pinnacle Real Estate Group Assessment
The Healthcare Real Estate Market Continues Adjusting.
Healthcare employment has rebounded noticeably better than the broader job market. Medical offices were much more insulated from the declines in demand compared to that of other property types. Healthcare employment fell as much as 6.4% in 2020, but stable growth is to be expected over the next 5 years. The continuing implementation of telehealth will lead to a greater role in the healthcare sector, but the overall impact on medical office buildings most likely remains negligible. Medical properties are expected to see a rebound in demand this year as the COVID-19 virus subsides. Medical office investors are expecting good growth opportunities due to the levels of transactions and pricing being more flexible than other property types.
Christopher Louis, ASA, MAI
Director
720-598-1439
CLouis@AskPHC.comMike Vandaveer
Director
720-599-7883
MVandaveer@AskPHC.comTony Price
Analyst
720-386-3540
TPrice@AskPHC.comApril 2021 Real Estate Newsletter
Posted On:Healthcare Real Estate Transactions and New Construction
Tampa General Hospital and Kindred Healthcare Break Ground on Freestanding Inpatient Rehabilitation Hospital. Anchor Health Properties has begun construction on a new 59-bed, 87,649 square foot inpatient rehabilitation hospital which will offer expanding services to the regional Tampa Bay, FL community. The facility will have all private rooms and offer state-of-the-art technology. Transitional living apartments designed to simulate a residential apartment will enable patients to heal in a personalized and private environment as they prepare to return to independent living. Patients will also experience specially planned rooms to for dialysis treatments and programs dedicated to neurological conditions, stroke, brain injury, and amputation recovery.
Healthpeak Properties Plans to Double Size of Biotech Campus in Torrey Pines. One of the nation’s largest holders of biotech and medical office real estate has made plans to expand its Callan Ridge life science campus in the coastal village of La Jolla, California, one of the primary biotech development regional hubs, and among San Diego’s most expensive office markets. Healthpeak, based in Denver, Colorado, plans to replace an existing 90,000 square foot building with a two-building campus totaling 185,000 square feet.
Sabra Health Care REIT Acquires Assisted Living Facility in Augusta, Georgia. The property includes a 75,000 square foot facility with 100 residential units and is close to 90% occupied.
Healthcare Real Estate Trends – Vacant BIG BOXES Being Backfilled by Healthcare and Technology
Health Family Care & Wellness Center Opening in Eatontown, New Jersey. Monmouth Medical Center and Children’s Specialized Hospital, which are both part of RWJBarnabas Health, have started development on a four-story, 82,000 square foot Health Family Care & Wellness facility at Monmouth Mall. The facility will offer women’s and pediatric healthcare services, wellness education and resources, a laboratory and blood drawing station, and an urgent care center. It is being developed by Rendina Healthcare Real Estate and is expected to be completed in October 2021.
Outpatient Facility to Open at Former Sears in Moorestown, New Jersey. Pennsylvania Real Estate Investment Trust (PREIT) confirmed Cooper University Health Care is scheduled to open a 165,000 square foot outpatient facility in the old Sears store at Moorestown Mall. Cooper University Health has the only state-designated Level I Trauma Center in South Jersey and is home to MD Anderson Cancer Center at Cooper and the Children’s Regional Hospital at Cooper. It also has a network of more than 100 medical offices and four urgent-care centers throughout the region. PREIT, which emerged from Chapter 11 proceedings in December after confirming an agreement with Strategic Value Partners, has plans to redevelop Moorestown Mall to include 1,000 apartments units as well as a hotel.
Amazon Converting Vacant Mall into Distribution Center. The Cortana Mall in Baton Rouge, Louisiana is scheduled for demolition will become a new 3,000,000 square foot distribution center for Amazon. This project is part of the company’s aggressive expansion of its already impressive distribution network, as they are considering opening 1,000 delivery stations across the nation. Several weeks ago, Amazon announced plans to open a last-mile delivery station at the former Knoxville Center Mall site in Tennessee which closed in January of last year. The existing mall facility will be demolished, and a new 220,00 square foot facility will be constructed. Previously, Amazon transformed the former Rolling Acres Mall in Akron, Ohio into a 640,000 square foot robotics distribution center.
Pinnacle Real Estate Group Assessment
Overall Healthcare Real Estate Market is Healthy and Adjusting. The previous year has presented numerous issues and obstacles to a multitude of industries and sectors, including commercial real estate. The COVID-19 pandemic seems to be stabilizing with the distribution of vaccines combined with consistently decreasing positive case numbers. As a result of these positive changes, the healthcare sector of commercial real estate is relatively healthy and has adjusted to turn the struggles of other industries into opportunities. Healthcare entities are pursuing opportunities to transform properties that were once considered retail into healthcare facilities. A prime example includes using vacant stores as temporary COVID-19 vaccine sites, turning them into new long-term healthcare-based development projects. The healthcare real estate industry has devised creative project solutions and we expect this trend will continue as the struggles of retail facilities and the juxtaposition of the expanding healthcare industry remains an environment to cultivate these opportunities.
Christopher Louis, ASA, MAI
Director
720-598-1439
CLouis@AskPHC.comMike Vandaveer
Director
720-599-7883
MVandaveer@AskPHC.comTony Price
Continue reading →
Analyst
720-386-3540
TPrice@AskPHC.comMarch 2021 Real Estate Newsletter
Posted On:Healthcare Real Estate Transactions and New Construction
53-Acre Life Sciences District in Houston Scheduled to Break Ground. Hines and 2M Real Estate are scheduled to break ground and begin construction on a five-story, 270,000 square foot advanced laboratory and life sciences building in the Texas Medical Center of Houston. The first phase of Levit green, a life sciences mixed-use project, includes a 25,000 square foot incubator lab and office space for entrepreneurs and startups, as well as several lakes, a boardwalk, fitness center, outdoor garden, 7,000 square foot conference center, and 3,500 square feet of restaurant space.
Remedy Medical Properties Completes Development of Piedmont Healthcare Medical Office Building. Remedy Medical Properties has announced the completion of the 5-story, 113,000 square foot Piedmont Medical Plaza II which it manages and owns. The plaza is on the Piedmont Newman Hospital campus in southwest Atlanta. This is the second outpatient care facility on the Newman campus and provides a large range of services. The project broke ground in fall of 2019 and construction was completed in December of 2020, with a move-in phase at the end of January 2021. The building serves as a one-stop healthcare destination for patients in the Atlanta area.
167,348 SF Lease on Eleventh Avenue in Manhattan. The space for Icahn School of Medicine at Mount Sinai, which covers the fifth through eighth floors of the tower, is projected to take up to three years to build out. Once the space is completed, the school will utilize its new location for molecular therapies, research and treatment of breast and spinal cancers, outpatient care, and an imaging center.
Healthcare Real Estate Trends
Decline in Leasing Softens Fundamentals. Developers had more than 10 million-square feet of medical offices under construction in the nation’s major metros at the end of 2020 with completion dates stretching into 2023. More than half of the underway projects are due in 2021, providing the lowest delivery pace in more than 10 years. Reduced deliveries in 2020 still outpaced net absorption, raising vacancy to 9.4 percent, a year-over-year jump of 80 basis points and the highest rate since 2015. Leasing activity will likely recover relatively quickly once patients feel comfortable returning to medical providers for checkups and elective procedures.
Pinnacle Real Estate Group
The Pinnacle Real Estate Group is a combination of professionals who use their extensive experience in both valuation and transaction services within the healthcare real estate industry to guide clients through multiple types of arrangements in a time-efficient and cost-effective manner.
Christopher Louis, ASA, MAI
Director
720-598-1439
CLouis@AskPHC.comMike Vandaveer
Director
720-599-7883
MVandaveer@AskPHC.comTony Price
Continue reading →
Analyst
720-386-3540
TPrice@AskPHC.comPHC December 2020 – January 2021 Real Estate Practice Newsletter
Posted On:PHC December 2020 – January 2021 Real Estate Practice Newsletter
Continue reading →PHC November 2020 Real Estate Practice Newsletter
Posted On:
Pinnacle Healthcare Consulting (PHC) has access to a wide amount of data and has provided commercial real estate appraisals confirming Fair Market Value on healthcare properties across the country. We are expanding Pinnacle’s real estate services to include consulting for lease restructuring, development projects, and consulting for real estate transactions within the healthcare industry. Our November 2020 newsletter provides an update and information on the real estate market and recent transactions.
PHC November 2020 Real Estate Practice Newsletter
Continue reading →PHC October 2020 Real Estate Practice Newsletter
Posted On:PHC October 2020 Real Estate Practice Newsletter
Continue reading →PHC September 2020 Real Estate Practice Newsletter
Posted On:PHC September 2020 Real Estate Practice Newsletter
Continue reading →PHC April 2020 COVID-19 Real Estate Practice Newsletter
Posted On:PHC April 2020 COVID-19 Real Estate Practice Newsletter
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