Welltower has acquired a portfolio of six Class A medical office buildings and properties under construction across in-fill markets in the New York City metro area under a newly formed joint venture with Aspect Health for a pro-rata investment amount of $98 million. In addition, the JV will have a ten-year exclusivity agreement on future development opportunities in the NYC metro area.
The investment is part of Welltower's new strategic joint venture with Aspect Health, a fully-integrated real estate developer, property manager, investor and advisor focused on healthcare strategy and real estate development. The partnership will combine Aspect Health's expertise in design and development and Welltower's data analytics platform.
Welltower and Aspect also agreed on a ten-year exclusivity agreement on future development opportunities. The existing portfolio consists of multi-tenanted Class A medical office buildings, including ambulatory surgery centers, predominantly ground-up developed by Aspect Health. The portfolio is 98% occupied and 100% triple-net leased to hospitals and physician groups. It has a weighted average lease term of approximately 12 years.
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The first development of the new partnership will be a 60,000 square foot outpatient medical building outside of New York City. The property is expected to commence construction in early 2022 and will be master leased to a leading health system for 20 years.
Shankh Mitra, CEO and CIO of Welltower, says the partnership with Aspect Health will allow his company to add a highly experienced developer and operator of healthcare real estate in the greater New York City region.
As Welltower and Aspect join forces, they will be confronting a number of investors new to the healthcare real estate sector since the pandemic. The category's overall strong fundamentals before the pandemic and the resiliency during the economic downturn have attracted a broader range of investors to the medical office, according to Marcus and Millichap. In addition, it says that the rise in population aged 65 and older and a rise in elective procedures and routine appointments could increase the number of buyers of sub-$10 million on- and off-campus assets this year.
The flood of investor interest in medical office has led to record trading, according to M&M. In the 12 months ending March 2020, medical office closings accounted for nearly 30 percent of all U.S. office sales. From 2015 to 2019, they comprised 21 percent of all office trades. And, from October 2020 through March 2021, the number of closings represented the strongest six-month stretch for deal flow in more than 20 years.
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Leslie Shaver
Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.
