WASHINGTON, DC-Cassidy Turley got the nod to market Washington Real Estate Investment Trust’s 1.3 million square foot medical office portfolio with Paul Collins, Bill Collins, Jud Ryan, Drew Flood and James Cassidy leading the team. J.P. Morgan will act as co-agent.
A valuation hasn’t been set for the portfolio, Paul Collins tells GlobeSt.com. He says the 17-asset portfolio is about 90% occupied. More than likely the property will be sold in its entirety – meaning WRIT is not interested in breaking it up and selling it in sub-portfolios. “This is the largest medical office building portfolio in the DC area,” he says.
WRIT discussed the likely sale in its earnings call last week and provided more insight into how the portfolio has been performing (not well, relatively speaking) and what WRIT will do in the meantime (not much, in terms of acquisitions.)
Acquisitions haven’t been completely ruled out and the REIT has a credit line that could support a deal. But, CEO Skip McKenzie said, “…we’re not going to get over our skis in having a huge acquisition pipeline prior to the transaction. But keep in mind, I mean, we have done reverse 1031 transactions, and we would like to do some in this repositioning as well. So it’s a possibility.”
WRIT also noted that the two best performing sectors continue to be retail and multi-family, while office and medical office trended negative year-over-year for the last quarter. The medical office division has about 13% of its rents rolling this year.
McKenzie also discussed why the REIT decided to sell off its medical office holdings. It came down to math and the areas of the market where it saw the greatest opportunity for growth, he said. WRIT’s “ownership position for office is about 1% of the DC office market overall. Our position in multi-family is less than 0.05%, and retail is under 2% of the total market. We view the growth opportunities in these three sectors as vast and expansive.”
On the other hand, with medical office, “we’re working in a market of non-hospital owned industrial grade space of about 7 million square feet, of which we own 1.3 million square feet. Without expanding our medical office footprint into other geographic areas, we anticipate it will be hard to grow this portfolio as compared to the other divisions.”