CHICAGO-Medical office owners and healthcare systems that needto monetize their real estate might want to consider disposing ofsome of their properties because it’s a seller’s market, accordingto capital markets experts who spoke at the 2010 Medical OfficeBuildings & Healthcare Facilities Conference.

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Nearly 600 healthcare real estate executives attended theconference, which was sponsored by the Building Owners &Managers Association. “There are a lot of distressed buyers outthere that are under pressure to make a move [to acquire assets],”says Al Pontius, managing director of Marcus & Millichap’shealthcare real estate group. “There’s a window right now forsellers, but demand will moderate come next year.”

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Pontius participated in a general sessions titled. “CapitalMarkets 2010: A Building Year”, which was moderated by JonathanWiner, executive vice president of Seavest Inc. The panel alsoincluded: Jerry Doctrow, managing director of Stifel, Nicolaus& Co. Inc.; Jeffrey Cooper, executive managing director ofSavills LLC; Jim Moloney, managing director and head of real estatefor Cain Bros. & Co.; and P.J. Camp, managing director ofShattuck Hammond Partners.

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Publicly-traded healthcare REITs are under pressure to investthe capital they’ve raised since the capital markets have loosenedDoctrow notes. Over the past 18 months, these companies have raisedmore than $1.5 billion in debt and have more than $5.3 billionavailable on their balance sheets.

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Moreover, the cost of debt for healthcare REITs is lower todaythan it was before the credit crisis – it’s down to 4.9 percent,according to Doctrow. “Healthcare REITs have dominatedtransactional activity, and they will be major investors,” hepredicts.

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It’s not only publicly-traded healthcare REITs that are flushwith capital, either. Non-traded healthcare REITs have been verysuccessful in raising funds from high-net worth individuals,according to Cooper. “They’ve been raising money at a fairly goodrate,” he notes.

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In fact, non-traded REITs were the most consistent buyers in2009 and are active again this year, Moloney notes. For example,Grubb & Ellis Healthcare REIT II and Healthcare Trust ofAmerica Inc. have already made significant acquisitions thisyear.

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However, many of these non-traded healthcare REITs are reachingthe end of the investment life and will be required to executivetheir exit strategy – either an IPO or wholesale acquisition byanother firm. “This is a relatively near-term event that will occurfor these entities,” Moloney points out.

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Depending on the course these non-traded REITs take, theseportfolios could provide inventory for hungry medical officebuyers. Moreover, as healthcare reform impacts hospital revenuesand reimbursements, more healthcare systems will jump on the“monetization bandwagon” and sell off some of their medical officebuildings, Camp says, providing additional medical officeinventory.

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