Douglas M. Pasquale, the REIT's president and CEO, pointed out "statistics reflect that during the dot-com bust of 2000, recession of 2001 and the jobless recovery of 2002 and 2003, asking rental rates for medical office fees barely budged." At the same time, however, standard office rates fell by 21% from their peak in the cycle, he noted.

NHP's medical office building portfolio is closing in on three million sf, steadily adding to holdings and ensuring a pipeline of new space through a deal that it signed in February with San Diego-based Pacific Medical Buildings. The deal calls for NHP to eventually acquire up to up to $2 billion in existing and planned medical office properties from PMB. Specifically, it calls for NHP to acquire 18 multi-tenant medical office buildings, including six that are under construction, for $747.6 million. The buyer also will assume about $282.6 million of mortgage financing.

During the first two quarters of this year, NHP acquired eight of the 18 buildings for $198.3 million. Potential future acquisitions of properties from PMB could then push the total to $2 billion.

"We are getting more than our fair share of investments in a challenging market, which we expect to continue due in large part to our exclusive acquisition pipeline with Pacific Medical Buildings," Pasquale said. He added that, including the Pacific Medical Building purchases, NHP's total investments in the second quarter totaled $250 million.

According to Pasquale, NHP is in a good position to continue its acquisitions. He said the REIT "has a strong balance sheet with ample capital available to make quality investments as they present themselves, without any to access to the capital markets."

Donald D. Bradley, NHP executive vice president and chief investment officer, said medical office buildings are holding their own in terms of values. They continue to sell at cap rates of around 7% on average, he said, with the highest-quality assets commanding cap rates of 6% and lower.

The NHP execs commented on the medical office building portion of their business during a conference call in which the company, which also owns seniors housing and long-term care facilities, reported higher FFO and net income for the second quarter. Quarterly FFO grew to 56 cents per share from 51 cents per share on a year-to-year basis, while net income grew to $1.69 per share from 93 cents.