September 2021 Real Estate Newsletter
Healthcare Real Estate Transactions and New Construction
World’s First COVID-Conscious Skyscraper and Medical Center.
An all-in-one residential, hotel, and medical skyscraper in downtown Miami was recently annuonced. Miami Worldcenter is currently the nation’s largest urban core construction project and America’s second-largest real estate development. The 55-story, $500-million, 600-foot-tall Legacy Tower at the Mammoth Miami Worldcenter is the result of a revolutionary joint venture and partnership between Adventist Health, Accor Hotels, Blue Zones, Royal Palm Companies. Who are these companies? Adventist Health is one of the nation’s largest not-for-profit, faith-based hospital and healthcare systems; Blue Zones, the global leader in human longevity research; Accor Hotels, one of the world’s largest hospitality companies; and the Royal Palm Companies — Florida’s preeminent luxury high-rise real estate development firm. The Legacy Tower’s $100-million, 120,000-square-foot, state-of-the-art medical center will be the most technologically advanced health and wellbeing facility in the world, according to Royal Palm Companies CEO, Daniel Kodsi.
KKR Targets $1 Billion in Healthcare Properties.
The New York private equity giant and Cornerstone Companies, a full-service healthcare real estate investment firm, entered a joint venture to acquire and develop a portfolio of diversified medical properties across the country. The pair started off by seeding the portfolio with a recapitalization of 25 healthcare properties owned by Indianapolis-based Cornerstone. Together, they plan to buy more than $1 billion in real estate at a time when demand for healthcare services and medical testing have increased with the spread of COVID-19.
Purchase of 107,228 Square Foot MOB in Maine.
Davis Medical Investors LLC has acquired the 10-story, 107,228-square-foot 84 Marginal Way building on 1.37 acres in Portland’s popular Bayside district. The Class A, 100 percent leased building is anchored by InterMed, Maine’s largest private medical practice. 84 Marginal Way is InterMed’s flagship location and it delivers a wide variety of services including: internal medicine, pediatric medicine, family practice, physical therapy, obstetrics and gynecology, dermatology, emergency medicine, cardiology, audiology, and sports medicine.
Healthcare Real Estate Trends
Recapitalization of Three (3) Healthcare Real Estate Portfolios.
In the past couple of weeks, there have been announcements of three (3) fairly significant Recapitalization transactions in the healthcare real estate industry. A $245M, 31 building portfolio, totaling 545,813 square feet across 10 states was announced by JLL who represented Montecito Medical Real Estate in arranging the terms with AEW Capital Management. CBRE announced the recapitalization of the RG Real Estate (RGRE) portfolio comprised of a 10 MOB properties totaling 222,337 square feet in the Atlanta, Georgia MSA. Newmark represented Global Nephrology Solutions (GNS) involving a portfolio of 15 dalysis and MOB facilities totaling 160,854 square feet in Arizona and Florida.
Pinnacle Real Estate Group Assessment
Healthcare Real Estate Taking Advantage of Recent Popularity through Recapitalization and Monetization.
In last month’s August newsletter, we assessed that healthcare real estate, primarily because of its stability through the pandemic, has become a respected and highly sought-after sector of commercial real estate industry the past twenty plus months from an investment perspective. Popularity has created a trend for retail and office type properties to be transitioned / redeveloped into healthcare facilities. The newfound popularity combined with other factors including the sustaining lower cost of capital, is creating another trend of Recapitalization and Monetization for healthcare entities. As mentioned above, recently there are three (3) separate healthcare entities that have finalized fairly significant transactions related to this trend. The reason being, healthcare entities are taking advantage of the steadily increasing values of their commercial real estate assets and using it for a variety of scenarios, that for the most part, fortify the entities’ current financial situation and capability going forward. This Recapitalization and Monetization opportunity could help the healthcare entity stabilize its overall financial situation if it experienced a downturn during the pandemic or has any existing financial struggles. This trend can allow a healthcare entity to upgrade and expand its facility or overall portfolio. It can also provide opportunities to partner and joint venture with legitimate Capital entities for current and future needs. This trend may not be suitable for every healthcare entity, but we do believe unless something drastically changes the current market conditions, this trend of Recapitalization and Monetization within healthcare real estate will continue going forward and provide opportunities for varying sectors in both the healthcare and commercial real estate industries combined.
Christopher Louis, ASA, MAI