Lake Lurna Professional Center is a 45,458-rentable-square-foot medical office property in Downtown Orlando.

MIAMI—AW Property Co. has won the confidence of investors. That said, the property type is part of the attraction.

Capital One provided a $46 million loan to AW Property to refinance a portfolio of seven medical office buildings (MOBs) in Florida totaling 251,000 square feet. The loan was provided at the first closing of AW Property's third healthcare investment fund, AW Florida MOB III. This is the seventh transaction that Capital One has closed with AW Property.

“AW Property's goal was to align maturities on the portfolio and to hedge the fund's interest rate risk by swapping to fixed-rate debt at closing,” says Erik Tellefson, managing director of Capital One Healthcare. “Because we were familiar with the properties, we were able to move forward with the transaction quickly.”

AW Property specializes in medical office properties in major markets in the State of Florida. Its investment and management portfolio includes 36 properties totaling more than 1.6 million square feet.

The Florida MOB portfolio consists of six on-campus properties and one that is adjacent to a medical center campus. The assets are located in major coastal markets in the State of Florida, including Sarasota, West Palm Beach, Ft Lauderdale, and St. Petersburg.

The overall US medical office building vacancy rate was 8% in the first quarter of 2017. That's down by nearly 300 basis points from the first quarter of 2010, and significantly below the vacancy rate for the US office market overall (13% in Q1 2017).

“The evolution of medical technologies is boosting demand for newer product with the infrastructure capable of handling cutting-edge devices and systems,” Jim Hayden, executive managing director, Healthcare, Global Workplace Solutions, CBRE, tells GlobeSt.com. “Medical office space that helps providers minimize costs and maximize outcomes, including buildings that support collaboration and can accommodate new technologies that help them achieve these goals, will likely remain in favor.”

Medical office cap rates have consistently decreased from a high of 8.3% in mid-2010 to 6.8% as of the first quarter of 2017. On a regional basis, average cap rates have been lowest in the West over the past seven years, below the US average by about 60 bps. However, the spread between the highest and the lowest regional cap rates remained relatively tight during this period, as industrywide trends have a similar impact across the various markets.

“Comparatively moderate regional differences are an attractive feature of medical office as an investment class,” Lee Asher, executive vice president, Healthcare, CBRE Capital Markets, tells GlobeSt.com. “Because there is demand for healthcare everywhere, investors are generally more willing to look outside the primary markets compared with traditional office investment, and this is apparent in pricing metrics.”

Instant Insights /

AW Property Demos Appetite for MOBs With Strong Loan

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