ATLANTA-There’s an old saying that one cannot run from the past. Yet, while a three-building, 184,705 square foot medical office building (MOB) portfolio for sale in the Atlanta suburbs has a checkered history, the broker says there is undoubtedly room for redemption for the portfolio and plenty of potential upside for a new owner.
All three of the buildings were pushed into foreclosure in 2009-10 by the Great Recession, the overbuilding of healthcare real estate in the Atlanta area and other factors. The current owner/seller snapped them up at a discount at the bottom of the market and repackaged them during a period of increased demand and stronger pricing.
The seller has not been disclosed. However, according to news releases at the time, Marcus Partners, a “value-oriented” real estate investment firm based in Boston, acquired the healthcare properties in 2011. The assets were acquired through joint ventures with Atlanta-based Ackerman & Co., which also serves as property manager and leasing agent.
One of the buildings is Marietta Medical Center in the far northern Atlanta suburb of Marietta. The five-story, 98,534 square foot MOB is across the street from the 633-bed WellStar Kennestone Hospital. The other two buildings are part of Pinnacle at Eagles Landing, adjacent to Piedmont Henry Hospital in the far southern Atlanta suburb of Stockbridge. The two buildings have a total of more than 80,000 square feet of space.
Interest from potential buyers has been strong, according to Jim Kornick, who with Matthew Clinebell and Matt Tritschler are representing the seller. All are principals with Avison Young.
There are a number of reasons for the strong interest, Kornick says. For one, the current ownership transformed the once-distressed properties into a value-add opportunity by improving occupancy to about 75%. It also invested $1.4 million to renovate the Marietta building, which has achieved Leadership in Energy & Environmental Design Silver certification from the US Green Building Council.
“All of the heavy lifting has been done, leasing momentum has been established and the path to stabilization has been paved,” Kornick says.
Another reason for the strong interest is that the Atlanta healthcare real estate market is improving and remains quite competitive. While all three of the buildings have major hospital tenants – Northside Hospital and Piedmont Medical Care Corp. in Marietta and Emory Healthcare in Stockbridge – those tenants are in close proximity to hospitals operated by rival systems.
The battle for market share – particularly in fast-growing, upscale suburbs like Marietta and Stockbridge – has benefitted the MOBs and should benefit the new owner, Kornick adds.
“A year ago, there would have been no market for this kind of value-add deal, especially in Atlanta,” he says. “Now there is.”
Greater Atlanta continues to show signs of a recovery from its deep commercial real estate recession of 2009, and medical office occupancy rates have gradually recuperated to about 90 percent in some sub-markets, including Marietta.
Murray W. Wolf is the Founder and Publisher 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.