Broadstone Picks Up Four Medical Centers for $15M

TAMPA, FL-In a transaction that highlights how medical groups are leveraging their high quality real estate for company growth, Tower Radiology, a top-15 national radiology group, has sold four of its centers to Broadstone Real Estate for $14,510,000.

The transaction was structured as a sale-leaseback deal by Colliers International Tampa Bay’s Investment Brokers Camille Renshaw and Joshua Pardue. The pricing is a national record for comparable, stabilized medical office buildings at a 7.47% capitalization rate.  

Under the terms of the deal, Tower agreed to a 15-year, absolute net lease as the single tenant within each property. The medical group retains control of its own property management while the new landlord is free of maintenance responsibility, any future improvements, and property expenses.

“Our sellers were very demanding about pricing and we were scraping the bottom of the barrel to come up with anything comparable as a benchmark,” Renshaw, director of Office Investment Services at Colliers, tells GlobeSt.com. “The sale-lease back component is definitely telling about today’s market because monetizing the real estate is a great way to grow your business. Tower Radiology is not a business that was desperate for cash. It was just a great opportunity to grow.”

Colliers says institutional buyers have an eye on Florida due to the state’s long-term growth projection in the medical sector coupled with the reliable year-over-year cash flow growth that long-term net leases provide. Medical property owners are benefitting from this trend due to the compression of capitalization rates and the corresponding record sales prices.

“REITs are giving attention to medical assets,” Renshaw says. “There is a lot of cap rate compression. Medical assets are seen right now by REITs and other investors as a terrific way to stabilize your portfolio. Physicians don’t move unless there’s some huge factor. It adds a lot of stability for real estate owners when you have a physician in place.”

Tower’s medical portfolio holds the number-two rank in Florida and is considered among the top-15 imaging centers in the United States. The medical group’s growth will be further facilitated by this sale-leaseback.

Renshaw says converting from 10- to 15-year leases was the major break in the deal. She reports a similar trend on other transactions due to where the financial markets are.

“You have to evaluate deals from a strictly real estate standpoint—the steel, the dirt, the sticks, the bricks—if it’s less than a 10-year deal,” Renshaw says. “You turn it into an investment grade deal and evaluate the credit and get into that lower cap rate range when you can get into a 12-, 15-, or 20-year long lease. Buyers are very hungry for them. If I have a 15-year deal it will sell immediately.”