Chris Bodnar<@SM>Asher Lee<@SM>Greg Green

LOS ANGELES-Even after a record-setting year for medical office building sales in 2012, it doesn’t look as if would-be investors have any plans to slow down their pursuit of the product type for the remainder of 2013.  That’s the news from the most recent National Medical Office Investor Update, published quarterly by the Healthcare Capital Markets Group of CBRE Group Inc.

In the newsletter, Chris Bodnar and Lee Asher, co-leaders of CBRE’s Healthcare Capital Markets Group, report that respondents to its recent Healthcare Real Estate Investor/Developer Survey have allocated a total of $7.7 billion for MOB acquisitions in 2013.

That amount is most likely an all-time record, according to Bodnar and Asher, who co-write the newsletter with Greg Greene, the healthcare group’s senior vice president of debt & equity finance. According to CBRE, the $7.7 billion figure most likely does not represent all of the money that potential investors have allocated for MOBs, as the group sent its survey to 500 investors and did not hear back from all of them.

“The top three non-traded healthcare REITs (real estate investment trusts) alone have allocated $2.6 billion toward acquisitions in 2013,” newsletter states, “with some currently raising up to $12 million per day through their broker dealer networks.”

Bodnar, Asher and Greene note that investor demand for MOBs remains high despite the fact that Medicare providers are scheduled to receive a 2% reduction in such payments starting April 1 as part of federal budget cuts known as sequestration.

As for last year’s record-setting volume, CBRE tracked about $5 billion in MOB sales in 2012 — and those figures do not include Ventas Inc.’s acquisition of Cogdell Spencer Inc. and its portfolio of 72 medical properties. The deal was estimated at about $760 million, including debt.

Real estate research firm Real Capital Analytics Inc., came up with a different figure for 2012 MOB sales: $5.52 billion, which eclipsed the previous best of $4.96 billion in 2007. RCA’s figure for 2012 comprises only transactions of $5 million or more and does include the Ventas-Cogdell Spencer deal.

As for pricing in 2013, the CBRE executives believe capitalization rates, or estimated yields, will not continue to compress despite reports that there is a shortage of desirable MOBs to meet such strong investor demand. At the end of the Q4 2012, CBRE reported the average cap rate at 7.9 percent.

“Given the imbalance of supply and demand, cap rates have compressed to record levels for core product,” CBRE notes. “However, we don’t necessarily see compression in yields for 2013, but rather an easing in tolerance for non-quantitative factors such as ground leases terms, tenant purchase options, earn-out structures, etc.” In other words, buyers might not have to accept lower returns when acquiring MOBs, but they will most likely have to accept more demands from the sellers.


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.