Eager Investors Pounce on Michigan MOB

WYOMING, MI-Attractive healthcare real estate investment opportunities don't last long in today's competitive marketplace. A case is point is the two-story, 53,000-square-foot Spectrum Health West Pavilion in Wyoming, MI, just south of Grand Rapids. The broker started marketing the property on a Friday, had “four or five serious offers” by the following Monday, and a letter of intent about three days later. The sale closed May 14.

“There was a lot of interest in this property,” says the broker, W. Michael Bennett, a senior managing director with Newmark Knight Grubb Frank in Chicago. The successful bidder and ultimate owner of the asset at 105 Wilson Ave. was American Realty Capital Healthcare Trust Inc., a public non-traded real estate investment trust. ARC paid $16.4 million, or about $309 per square foot, for the asset. “The back and forth was quite quick,” says Steven T. Leathers, a vice president with ARC Healthcare Trust.

The identity of the seller, identified only as a local developer, was not disclosed. Records on file with the Kent County MI assessor's office say only that the owner was an entity called W6-SHB LLC.

Spectrum Health West Pavilion is the type of property many healthcare real estate investors are seeking these days, Bennett says. Opened in 2006, the medical office building is a relatively new facility that is 100% occupied and triple-net leased to an Aa3 Moody's rated tenant. That tenant is Grand Rapids-based Spectrum Health System, a major not-for-profit system in West Michigan with nine hospitals and 130 ambulatory and service sites. The 15-year lease had nine years remaining at the time of the sale, Bennett says.

“Michigan is kind of a secondary market,” Leathers says, “but Spectrum is a top-tier system.”

Spectrum does not have a hospital in the immediate vicinity, Leathers goes on to say, so the MOB provides a way for the system to compete for market share in that growing area. Nearby competitors include St. Mary's Southwest hospital and Metro Health Hospital – both only about four miles to the east along Paul B. Henry Freeway (Michigan Highway 6).

A wide range of primary and specialty care is offered at the MOB, including cardiology, family medicine, general surgery, OB/GYN, orthopaedics, physical therapy and other outpatient services. The building sits on about 5.5 acres and has ample parking, Leathers says. A modest expansion is possible, but he says ARC has no immediate plans for that.

Bennett says the Spectrum Health West Pavilion acquisition is the latest in a series of deals Newmark Knight Grubb Frank has orchestrated for ARC. In December 2012, the firm brokered ARC's $21.7 million acquisition of the Michiana Hematology Oncology MOB adjacent to St. Joseph's Regional Medical Center in Mishawaka, IN. ARC has another large acquisition under contract through Newmark Knight Grubb Frank, Bennett adds.

ARC concentrates on acquiring MOBs affiliated with a top health systems, whether on or off campus, Leathers says. By building relationships with market leaders, ARC positions itself to be first in line for potential acquisition and development opportunities, he says.

Murray W. Wolf is the Publisher and Founding Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.