Healthcare Care Real Estate Insights (HREI) concludes its countdown of the top stories and trends of 2012 with numbers 1-3.
3. A Very Big Deal (Duke Realty’s MOB Portfolio Acquisition)
When Indianapolis-headquartered Duke Realty purchased 14 medical office buildings for $342 million from White Plains, NY-based Seavest Healthcare Properties late in 2012, it sent us here at Healthcare Real Estate Insights (HREI) scrambling. We checked our archives to find out if there had ever been a larger MOB transaction not involving the sale of a company, or a portion of a company, since we started our publication in 2003. We didn’t find any. The past decade’s largest MOB transaction is indicative of how committed Duke Realty has become to the healthcare sector. In 2009, the REIT, which had long focused on general office and industrial properties, set a goal of having its healthcare holdings grow to 15 percent of its overall portfolio by the end of 2013. With a couple of purchases in late 2012, the REIT reached its goal a year early, and now has total healthcare holdings valued at $1.5 billion based on purchase price.
2. Happy Days are Here Again (for MOB Sales)
For the first time since 2008, MOB sales during the first three quarters of 2012 topped the $4 billion threshold, according to New York-based Real Capital Analytics Inc. We’re still waiting for the final numbers, but MOB sales brokers say Q4 sales were strong. So there is a good chance that 2012 will go down as the best year for MOB sales since RCA began accumulating data on the sector in 2001 – perhaps exceeding the $4.99 billion recorded in 2007. Fueling the strong sales volume, at least near the end of 2012, were some pending increases in taxes on healthcare facility sales. Although some say the tax hikes will slow sales in early 2013, others say that will do little to deter MOB-hungry investors.
1. Obamacare Appears Here to Stay
Even President Obama’s detractors have acknowledged that his return to the Oval Office is likely to spur positive results for those involved in healthcare real estate sector, in large part because it secures the status of his baby, the Patient Protection and Affordable Care Act (PPACA). As one source told us before the election, “I am voting for (Mitt) Romney but Obama will be better for healthcare real estate.” With Mr. Romney threatening to do his best to rescind the PPACA if elected, many health systems were in a wait-and-see mode when it came to real estate projects. Now, however, they can continue preparing for declining reimbursements, more insured patients, a need for better patient outcomes, and a need to be as efficient as possible, among others. Some say this could result in a new wave of outpatient development opportunities. A need to raise capital could also lead some systems to sell, or monetize MOBs, which would benefit investors.
John Mugford is the Editor of Healthcare Real Estate Insights, the nation’s first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.