Healthcare
Capital Markets
March 2022
Private buyers dominated 2021 investments in medical office
Top Medical Office Buyers, by Buyer Type
Source: JLL Research
  • Private capital, consisting of large investment managers and private funds, dominated the buyer ranks for medical office in 2021, representing 4 out of 5 dollars or nearly 80 percent of investment activity in the record year of MOB sales with a total $19.6 billion in trades.  This investor group consisted of large AUM investment managers, deploying capital from discretionary funds, separate accounts and sponsored non-listed REITs, frequently in conjunction with specialist operating partners.  The outsized competitiveness of private capital was fueled by the record fundraising and equity commitments to be deployed, especially in the alternatives space, with many new, scale entrants to medical office.  Highly accretive debt financing fortified the competitiveness of this group, with lenders offering exceptional leverage and terms and supported by record low interest rates.  
  • Belying these stats, the long-tenured healthcare REITs did near record investment volume at $3.2 billion, exceeded only by the notable 2017 year at $4.4 billion which was driven by Healthcare Trust of America’s $2.3 billion buy of the Duke Realty healthcare portfolio.  In spite of the seemingly higher cost of capital, the Big Three diversified healthcare REITs and the three MOB-only REITs, collectively, acquired 16 percent of MOBs by dollar amount.  These public REITs invested with scale in both large portfolios and one-off trades.  The buying activity was supported in some cases by joint venture partners or motivated by redeployment of capital between healthcare property sectors.  Top healthcare REIT buyers in 2021 were Physicians Realty Trust, Healthpeak and Healthcare Realty Trust.
  • Notably, the top 10 buyers of medical office in 2021 acquired $7.5 billion of the total $19.6 billion in trades, representing a sizeable 38 percent of all acquisitions. The top 10 buyer concentration consisted of the three healthcare REITs noted above and seven investment managers and/or their operating partners. Large portfolio trades were the fuel for some of these groups, but operator-investors like Montecito, Anchor and Remedy deployed substantial capital through old-fashioned shoe leather and hard work on one-off buys.
  • Health systems for the second year in a row bought more than $1 billion in medical properties, most often from investor owners.  26 different health systems acquired properties valued at $10 million or more.  Two major regional systems each acquired approximately $200 million in total medical office value. This recent phenomenon of buybacks has been supported by substantial cash on hand, unprecedented access to capital and a continuing proclivity to own, and in spite of pandemic era pressure on operating margins.  Buybacks have occurred on both a contractual basis via purchase options and rights of first refusal to purchase, as well as non-contractual arrangements.  The aversion to outright monetization of medical office buildings continues even as outsized growth capital requirements by the systems remain at record levels.
  • What does the future hold for 2022?  We’re off to a roaring start with the announced merger of Healthcare Realty Trust and Healthcare Trust of America, creating an $18 billion enterprise, as well as solid first quarter investment volume.  Rising interest rates would appear to increase the relative competitiveness of the low leverage REITs.  Macro trends such as inflation and rising interest rates, the conflict in Ukraine and continued supply chain and labor issues are driving global recession fears.   All of these trends point to the United States as a safe haven for investment, and for medical office, in particular, with its durable and reliable income producing qualities.
Recent Activity
New Listing - Investment Sale
The Ella at Carillon
125,254 s.f.
Largo, MD
New Listing - Investment Sale
Commonwealth of Virginia Medical Office Building
40,303 sf
Richmond, VA
New Listing - Investment Sale
Surgical Center of Connecticut
28,680 s.f.
Bridgeport, CT
Closed - Investment Sale
Ardent Health Sale-Leaseback
762,780 s.f.
Texas & Kansas
Closed - Investment Sale
Legacy Oaks San Antonio
227,657 s.f.
San Antonio, TX
Closed - Debt Placement
Upshot Medical Center
156,566 s.f.
Orlando, FL
Closed - Debt Placement
Burke Medical Center
26,669 s.f.
Burke, VA
 
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