Medical Assets Are Resilient and Attract Favorable Demographics

DALLAS—Completed in 2009, Coit Medical Center is a two-story, 32,201-square-foot medical office building. The property is located at 12230 Coit Rd. at the convergence of Lyndon B. Johnson Freeway (Interstate 635) and North Central Expressway (US 75), just off the campus of the Medical City Dallas Hospital. 

This positions the asset within three miles of more than 1,800 hospital beds at Medical City Dallas Hospital, Medical City Children's Hospital and Texas Health Presbyterian Hospital Dallas. This location is in line with the tenant mix at Coit. The fully leased facility is anchored by Baylor Scott & White Health. Additional tenants include Greater Dallas Orthopaedics, Legacy Heart Care, Texas Orthopaedic Surgical Associates and Lester Plastic Surgery. 

Coit Medical Center recently changed hands at an undisclosed acquisition price. Holliday Fenoglio Fowler LP marketed the property on behalf of the seller, Mohr Capital LLC, and procured the buyer, Anchor Health Properties. The HFF investment sales team representing the seller was led by managing directors Evan Kovac, Todd Savage and Philip Mahler, along with director Ben Appel. Kovac recently shared some insights about the sale and medical office buildings in general in this exclusive.

GlobeSt.com: In general, was the sales price at an average or higher price point? 

Evan Kovac: For similar profile core and core plus medical office buildings (MOBs) located in major markets, we are seeing stabilized pricing in the mid 5% to low 6% cap rate range.

GlobeSt.com: Medical facilities are almost always popular. What elements do they have that investors seek? 

Kovac: Investors see medical office properties as a stable asset class with long-term durability. Medical properties were very resilient through the downturn and favorable demographic trends lend to a growing favorability for this asset class. Also generally MOBs have longer-term leases, substantial improvement build out, retention rates of 80 to 90%, and stable income growth and occupancy, even during recessionary and slow growth periods.

GlobeSt.com:Is Dallas' investor market keeping pace with other metros around the country? 

Kovac: Yes, Dallas is symbolic of most of the major MSAs around the country. Tremendous demand for Dallas-area MOB investment opportunities that embody certain core characteristics, including newer construction, strong anchor tenant, long-term leases, high acuity services and prominent locations, on and off campus.

GlobeSt.com: What else is happening in healthcare real estate/investing of note?  

Kovac: A tremendous amount of new investors have capital allocations earmarked for US MOB investment. We saw two major private equity firms begin investing in MOBs in 2016 and expect that trend to accelerate in 2017 and beyond. The MOB space is becoming much more competitive. We are starting to see allocations from more and more foreign investors as well.

As previously reported, the ACA has impacted commercial real estate in a variety of ways.

DALLAS—Completed in 2009, Coit Medical Center is a two-story, 32,201-square-foot medical office building. The property is located at 12230 Coit Rd. at the convergence of Lyndon B. Johnson Freeway (Interstate 635) and North Central Expressway (US 75), just off the campus of the Medical City Dallas Hospital. 

This positions the asset within three miles of more than 1,800 hospital beds at Medical City Dallas Hospital, Medical City Children's Hospital and Texas Health Presbyterian Hospital Dallas. This location is in line with the tenant mix at Coit. The fully leased facility is anchored by Baylor Scott & White Health. Additional tenants include Greater Dallas Orthopaedics, Legacy Heart Care, Texas Orthopaedic Surgical Associates and Lester Plastic Surgery. 

Coit Medical Center recently changed hands at an undisclosed acquisition price. Holliday Fenoglio Fowler LP marketed the property on behalf of the seller, Mohr Capital LLC, and procured the buyer, Anchor Health Properties. The HFF investment sales team representing the seller was led by managing directors Evan Kovac, Todd Savage and Philip Mahler, along with director Ben Appel. Kovac recently shared some insights about the sale and medical office buildings in general in this exclusive.

GlobeSt.com: In general, was the sales price at an average or higher price point? 

Evan Kovac: For similar profile core and core plus medical office buildings (MOBs) located in major markets, we are seeing stabilized pricing in the mid 5% to low 6% cap rate range.

GlobeSt.com: Medical facilities are almost always popular. What elements do they have that investors seek? 

Kovac: Investors see medical office properties as a stable asset class with long-term durability. Medical properties were very resilient through the downturn and favorable demographic trends lend to a growing favorability for this asset class. Also generally MOBs have longer-term leases, substantial improvement build out, retention rates of 80 to 90%, and stable income growth and occupancy, even during recessionary and slow growth periods.

GlobeSt.com:Is Dallas' investor market keeping pace with other metros around the country? 

Kovac: Yes, Dallas is symbolic of most of the major MSAs around the country. Tremendous demand for Dallas-area MOB investment opportunities that embody certain core characteristics, including newer construction, strong anchor tenant, long-term leases, high acuity services and prominent locations, on and off campus.

GlobeSt.com: What else is happening in healthcare real estate/investing of note?  

Kovac: A tremendous amount of new investors have capital allocations earmarked for US MOB investment. We saw two major private equity firms begin investing in MOBs in 2016 and expect that trend to accelerate in 2017 and beyond. The MOB space is becoming much more competitive. We are starting to see allocations from more and more foreign investors as well.

As previously reported, the ACA has impacted commercial real estate in a variety of ways.