Plans Unveiled For Projects Totaling $86M

Central Texas Rehabilitation Hospital will be located at 1600 W. 38th St. on Seton Health Care Network's main health care campus. Construction on the $40 million project will launch in May 2009 with completion anticipated for Q1 2010. Also included in the deal is rehabilitation of the neighboring 101,000-square-foot Jefferson Building, a 70%-leased medical office building. RehabCare Group Inc. of St. Louis, in joint venture with Seton Health Care Network have signed a long-term lease with owner Advanta SPE One LP for the entire space.

Chris Barnet, managing director and principal with GVA Cawley's Healthcare Real Estate Advisory Group says RehabCare currently occupies the eighth floor of Seton's main medical facility, but growth necessitated a move. "Seton needs the space and Rehab Care needs more space," says Barnet, whose group structured the leases and helped provide strategic plans for the construction and management of the property.

Barnet, who also arranged lease details and is an advisory capacity with the Lotus development at 18939 McKay Blvd. in Houston, says Skilled Health Care in Lubbock, TX; Allegiance Health Management and RehabCare will be the primary tenants of that $40 million facility upon its completion in late 2009 or early 2010. The health care providers struck agreements with the ownership, a group of Houston-based doctors, and construction will launch on it next month.

Shreveport, LA-based Allegiance Health Management will operate a geriatric site facility at Lotus, while RehabCare will operate a long-term acute care facility. "As part of that 154,000 square feet, there is a medical office building component that will be built as part of the ground-up construction," Barnet comments. He says approximately 80,000 square feet will be given over to the medical office, with doctors soon to commit to the project.

Advanta Medical Development and Dallas-based Blackbird Studios are the developer and designer respectively for both projects. Another thing linking both projects, Barnet comments, was the need to understand how to structure leases and work with health care tenants and developers. This is especially true, as more real estate companies move toward health care as a fairly stable industry during the current downturn.

"The mechanics are very similar to structuring straight office developments and leases, but what differs is that health care, like most industries, has its own jargon and own set of regulations specific to the industry," Barnet tells GlobeSt.com. "To do a proper job for our clients, we have to understand the regulatory environment."

For example, some states have Certificate of Need, a regulation that governs the number and type of medical care facilities to be built. Barnet says in states with Certificate of Need regulations, the red tape can be pretty hefty. "Texas is user-friendly," he comments. "It isn't a CON state, so it's attractive to the health care industry for development."

The attraction of medical real estate in a recession, combined with the ageing baby-boomer population and a growing recognition among physicians that they aren't real estate experts, mean more real estate companies will likely enter the sub-industry. But an understanding of such regulations and an ability to build trust in physician groups will likely be the determining factor between real estate companies that succeed or fail in the field, Barnet notes.

"What we're finding is that the medical community, specifically physician groups, want someone they can trust, he adds. "Trust is the huge element in this whole thing."