Chicago

CHICAGO-In the first part of our report on a discussion titled, “New Strategies in Healthcare: The State of the Market,” a panel of healthcare real estate experts discussed what they foresaw as a growing need for new outpatient projects nationwide. The discussion kicked off a recent healthcare real estate conference that took place in Chicago.

As the discussion continued, the panelists noted that the Patient Protection and Affordable Care Act (also known as “Obamacare) and all of its requirements is usurping capital that hospitals and health systems might have spent on new projects. Tina Wardrop, vice president of Health Directions LLC said she is seeing the mandates of “Obamacare … sucking up capital in the area of information technology, and that will be a constraint on what is available to spend on real estate.”

At the same time that hospitals and health systems are feeling the financial effects of healthcare reform, the panelists noted that third-party investors have more capital than ever before to spend on acquiring or developing outpatient facilities, such as medical office buildings. They are hoping, in fact, that the capital needs of health systems and the acquisition desires of investors can come together. While 2013 was a record year for healthcare real estate sales nationwide, hospitals and health systems, for the most part, have remained reluctant to sell, or monetize, outpatient properties that they own.

Perhaps that will change as they realize that selling such assets and leasing them back can be a good way to raise needed capital, the panelists added. In recent years, they said, investors have had difficulty finding enough high-quality medical properties to acquire.

Shawn Janus, managing director with Jones Lang LaSalle Inc. called it a “mismatch” between supply and demand, which has some HRE developers and investors looking beyond the traditional MOB sector into the post-acute and senior living markets.

In terms of healthcare real estate sales, Lillibridge Healthcare Services president and CEO Todd Lillibridge said there was more to last year’s record volume of $5.52 billion, according to Real Capital Analytics (RCA) Inc., than meets the eye. The ramp-up of MOB investment from 2003 through 2008 was largely driven by institutions with seven- to 10-year investment horizons. Much of the MOB sales volume since 2010 has been driven by the exit strategies of those institutions; he foresees 2013 and beyond as a strong period as well.

Hopefully, investors won’t be the only ones selling MOBs, added Keith Konkoli, senior  vice president with Duke Realty Corp. “I think we’re all hopeful that there will be more hospital monetizations,” he said. With the financial pressures faced by hospitals and health systems, he said they should find monetizations and third-party development attractive.


John B. 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.