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  • April 2021 Real Estate Newsletter

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    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.com

    Mike Vandaveer
    Director
    720-599-7883
    MVandaveer@AskPHC.com

    Tony Price
    Analyst
    720-386-3540
    TPrice@AskPHC.com

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  • March 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.com

    Mike Vandaveer
    Director
    720-599-7883
    MVandaveer@AskPHC.com

    Tony Price
    Analyst
    720-386-3540
    TPrice@AskPHC.com

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  • COVID-19-Healthcare-Real-Estate

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    COVID-19-Healthcare-Real-Estate

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  • PHC December 2020 – January 2021 Real Estate Practice Newsletter

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    PHC December 2020 – January 2021 Real Estate Practice Newsletter

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  • PHC November 2020 Real Estate Practice Newsletter

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    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

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  • PHC October 2020 Real Estate Practice Newsletter

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    PHC October 2020 Real Estate Practice Newsletter

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  • PHC September 2020 Real Estate Practice Newsletter

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    PHC September 2020 Real Estate Practice Newsletter

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  • PHC April 2020 COVID-19 Real Estate Practice Newsletter

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    PHC April 2020 COVID-19 Real Estate Practice Newsletter

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  • PHC June 2020 COVID-19 Real Estate Practice Newsletter

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    PHC June 2020 COVID-19 Real Estate Practice Newsletter

    This Real Estate Practice Newsletter covers market activity and trends in certain regional market areas. Today is a brave, new world for the

    The PHC real estate group has complied articles via various sources such as CoStar, JLL, and Cushman & Wakefield that summarize expectations and performance during this period.

     

    6/20/2020

    CoStar commercial repeat sales indexes  provided a first look at commercial real estate pricing trends based on 831 repeat sale pairs in the first quarter and more than 225,707 repeat sales since 1996. CoStar monitors the measure of commercial real estate repeat sales activity. When a property is sold more than once, CoStar tracks the resulting price movement. This data forms the foundation for the CoStar price index.

    CoStar’s value-weighted U.S. Composite Price Index, which reflects the larger asset sales common in core markets, increased 2% over the wider first quarter and 5.9% in the 12 months . The equal-weighted U.S. Composite Index, which reflects the more numerous, but lower-priced property sales, (typical of secondary and tertiary markets), increased 4.6% in the first quarter and 6.5% in the previous 12 months.

    The first quarter data  indicates sales volume are  below previous monthly averages due to investors hitting the pause button in this uncertain environment as a result of COVID-19.  While January trading activity appears largely stable, the 1,993 repeat-sale  trades recorded demonstrate a 17% decrease in overall price from the same period in 2019. Similarly, repeat-sale transaction volume also began to drop from recent historical averages.

    The eventual impact of the pandemic and economic fallout on commercial real estate market fundamentals and pricing is currently unclear. While lockdowns and social distancing measures became the norm late into the first quarter, the full impact of the pandemic on property pricing has yet to unfold.  The major property type indexes  posted average price growth of 1.7% in the first quarter, and around 5% for the to date second quarter.

    The U.S. is ramping up testing to understand the full extent of the outbreak. Along with testing, the U.S. has attempted to isolate individuals with mild and moderate cases of COVID-19 and provide treatment to those with severe symptoms. Contact tracing can help authorities identify future cases where individuals have had contact with someone with a confirmed positive diagnosis. The U.S. is increasing production of health equipment (including masks, faceguards and ventilators) while expanding hospital and ICU capacity. Some are expediting drug trials and looking for existing remedies that could prove effective in lessening the severity of COVID-19; meanwhile, the research, development and testing of vaccine candidates is on a fast tract.

    In U.S. real estate markets, several decisions are made at the state and local level. At least 34 states have temporarily prohibited evictions and the federal government has issued a 120-day moratorium on evictions from federally subsidized housing or from a property with a federally backed mortgage loan. Major mortgage lenders including Citigroup and JPMorgan Chase have suspended mortgage payments. Some U.S. states have halted construction on all projects unless considered essential (i.e. medical facilities).

    Over the past several years, real estate investments have generated steady cash flow and returns significantly above traditional sources of yield—such as corporate debt—with only slightly more risk; however, as a result of the COVID-19 outbreak, this reality has changed and real estate players have been hit hard across the value chain. Service providers are struggling to mitigate health risks for their employees and customers. Many developers cannot obtain permits and are facing construction delays, stoppages, and potentially shrinking rates of return. Meanwhile, many asset owners and operators face drastically reduced operating income, leaving many feeling uneasy in regard to the number of  tenants that will struggle to make lease payments. “Concession” and “abatement” are the words of the day, and players are working quickly to determine to whom they apply and how much.

    Real estate assets are now performing in different ways during the COVID-19 outbreak. The market has pivoted mostly on the inherent degree of physical proximity among an asset class’ users—even more so than on its lease length. Assets with greater human density seem to have been hit the hardest: healthcare facilities, regional malls, lodging, and student housing have sold off considerably. By contrast, self-storage facilities, industrial facilities, and data centers have faced less-significant declines. The unlevered enterprise value of real estate assets fell 25% or more in most sectors, and an extreme 37% decline for lodging. It’s no surprise that—when shoppers avoid crowds, universities send students home, and retailers, restaurants, and hotels close their doors—owning and operating those properties is a less valuable proposition. As such, liquidity and balance-sheet resilience have become paramount.

    While the long-term consequences are difficult to predict, the immediate market consequences of COVID-19 have been made clear—the public market sell-off in certain real estate types has been nothing short of dramatic. All companies, both public and private, are working diligently to navigate the immediate crisis with respect to staff, tenants, and end users of space, while also facing tough business trade-offs. Industry leaders are seeking the ideal balance between capital preservation and further strengthening their competitive differentiation.

    Strategic review processes aim to understand how real estate usage will evolve moving forward; however, rather than relying on traditional economic or customer-survey-driven approaches, real estate leaders are looking to psychologists, sociologists, futurists and technologists for answers. Will employees demand more isolated workspaces? Will people avoid living in condominiums for fear of using public facilities? While uncertainty currently reigns, by employing a range of creative personnel and using new methodologies—such as deep design interviews—business leaders may find new and more predictive insights.

    Unique to real estate, particularly healthcare real estate, is an elongated deal horizon. Most major healthcare real estate developments are years in the making. The marketing and absorption of a completed real estate project takes years before reaching stabilization; for example, a typical MOB real estate deal can extend 1 year + before consummation.

    The Dodge Data & Analytics, a construction data company, is projecting healthcare building starts will rise 6% for 2020, achieving $29.7 billion in new projects nationwide. Building starts are expected to rise 13% between 2020 and 2021 for a total of $33.6 billion in new projects, the highest growth for new healthcare building starts since 2016.

    The real estate repercussions resulting from the COVID-19 pandemic are immediate, and while closely monitored, will most likely not have a significant impact on healthcare real estate into the near-term and long-term.

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