HEALTHCARE INFLUENCER: Montecito Medical Real Estate
Montecito Medical Real Estate’s business model has changed the traditional relationship between buyers and sellers of medical office properties.
Montecito Medical Real Estate’s business model has changed the traditional relationship between buyers and sellers of medical office properties to one in which sellers can continue to manage their properties if they choose, maintaining both existing tenant relationships and an existing revenue stream. In addition, they can opt to reinvest a portion of the sales price as equity in a single-purpose entity led by Montecito, which becomes the asset’s legal owner.
In short, sellers enjoy both regular distributions and a return on their reinvestment when Montecito sells the property as well as significant tax advantages that can be especially valuable to high net-worth individuals. Sellers have another option as well: they can co-invest in additional properties that Montecito acquires as it builds a portfolio.
The model strongly resonates with physicians, especially in today’s shifting medical environment. In conversations with physicians about MOB sale leasebacks of their MOBs, the company has found that the opportunities to both reinvest in its own office building and to co-invest in other MOB acquisitions gives it a greater sense of control. Much of the credibility of the model lies in its historical rate of return on its investments, which the company says has significantly outperformed both Wall Street and competitors in the sector over the past 10 years. For these reasons the company has grown dramatically, both in terms of its acquisitions and its influence on the medical real estate field.
Montecito doubled its year-over-year acquisition volume between 2016 and 2017, and again between 2017 and 2018. Today, Montecito is a national company with portfolio properties in 27 states that totals more than 6 million square feet and has a combined value of more than $2.8 billion. Not surprisingly, it ranked as the largest privately held buyer of MOBs in the US for both 2016 and 2017, according to Real Capital Analytics. And it looks like the firm will see a continuation of that trend—as of 2018’s final quarter, it was on track to end the year with a 123% jump in volume.
Driving Montecito’s growth is a seasoned collection of professionals led by CEO Chip Conk and Chris Conk, principal, acquisitions. Other key team members are: CFO Paul Sandler; Justin Hayball, EVP of acquisitions; Bryan Skelton, SVP of finance; Bryan Brown, VP, acquisitions; David McNeil, VP, property and asset management; Joellyn Shannon, VP of marketing and research; Doris Lacson, VP and corporate controller; Rus Gundy, AVP of investments and underwriting; marketing coordinator Nicole Romano; and Karina Juhasz, regional asset manager.
In addition to its talent, the firm partly attributes its success to its proprietary market intelligence system, which is able to analyze more than 10 terabytes of data on a market. Montecito uses the system to evaluate local markets and assess the value of a particular property. This system has allowed it to evaluate $1 billion in MOBs each month, reflecting up to 100 potential deals. The company has also developed relationships with major health systems such as Cleveland Clinic, UCLA, John Hopkins, Carolinas Health System and Beth Israel.
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