A Philadelphia-area firm that focuses on owning and developing corporate facilities recently acquired a portfolio of three medical office buildings (MOBs) in the Chicago suburb of Berwyn, IL.
While Wayne, PA-based Patriot Equities' acquisition of the MOBs was for a modest price at $15.3 million, it could be reflective of a new type of buyer that is scouring the market for healthcare facilities: net lease investors.
The deal comes at a time when many healthcare real estate professionals are urging hospitals and health systems to take a more corporate approach to occupying real estate, which would entail selling certain facilities, both outpatient and in-patient hospitals, and leasing them back from the new owners.
This strategy is being touted at a time when many of the country's health systems are facing daunting expenses, dwindling Medicare and Medicaid reimbursements, and myriad new challenges in the era of healthcare reform.
The three buildings acquired by Patriot Equities are adjacent to and 100 percent master leased by MacNeal Hospital in Berwyn, which is part of Dallas-based Tenet Healthcare Corp. The buildings have a total of 95,869 square feet of space, meaning the price per square foot was about $160.
Members of the Capital Markets team at Avison Young's Chicago office, led by Erik Foster and Mike Wilson, represented the seller, which, according to real estate research firm Real Capital Analytics Inc., was a joint venture (JV) of Chicago-based Heitman and Kuwait-based Global Investment House.
“The portfolio's on-campus location in an in-fill market and its affiliation with a large national hospital system, Tenet Healthcare, made it an attractive pool of assets to buyers,” Mr. Wilson of Avison Young noted in a statement. “This transaction demonstrates the strength and attractiveness of the Chicagoland healthcare market and the draw of capital toward assets and locations that are strategic to a well-established health system.”
At a time when many HRE professionals are noting that MOB pricing is quite high due to strong demand and a shortage of properties, Patriot acquired the portfolio for significantly less than the previous sale price: $22.7 million in 2006, according to RCA.
One of the buildings in the portfolio, at 3340 S. Oak Park Ave., is a three-story facility with 42,779 square feet of space. It was renovated in 2004 and is home to 14 medical practices. Next door is a two-story, 5,990 square foot MOB that houses the MacNeal Physicians Group. The third building, at 6804 W. Windsor Ave. houses the hospital's IT infrastructure as well as administrative space.
As for Patriot Equities, the company led by President and CEO Erik E. Kolar calls itself the “first real estate investor and developer with a singular focus on the acquisition, ownership and operation of corporate assets.”
While Patriot officials could not be reached for comment, the company's website says it “partners with corporate sellers to acquire their property and release capital resources from underutilized or non-strategic assets. Corporations benefit by 'monetizing' the value of their real estate while freeing themselves up to focus on core competencies.”
John B. Mugford is the 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.
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