CBRE Buys Medical Buildings in a Bid for Safety
CBRE, one of the biggest real estate asset managers in the world, recently bought a 95% stake in a portfolio comprising 25 medical office buildings, reports The Wall Street Journal’s Peter Grant.
The portfolio, purchased by a division of CBRE Global Investors, contains 1.4 million square feet of space in 10 states. The group bought it from a venture of Kayne Anderson Real Estate Advisors and MB Real Estate Healthcare, according the companies. The venture will hold on to a 5% stake and continue managing the buildings.
This transaction could be a sign that healthcare properties are gaining more popularity with institutional investors.
CBRE’s purchase price was not revealed, but according to Grant, industry experts estimate this type of portfolio would trade somewhere between $510 million and $590 million. The estimate is based on the portfolio’s high concentration of property in the Atlanta and Chicago areas and has a development site.
This is the first time CBRE has ventured in a medical office buildings portfolio. Investors of CBRE’s size ($99 billion in assets under management) generally acquire more traditional real estate properties like shopping malls and office buildings. However, CBRE sees less conventional properties like medical office buildings as a less expensive alternative as the more traditional kinds of property have increased recently.
There’s also a worry among investors that the commercial property bull market, which is now in its eighth year, won’t be running much longer. Analysts see medical office buildings as a more “recession proof” option because people will always need medical care whether the economy is doing well or not.
“If someone needs a hip replacement, they need to go get that done regardless of where the economic cycle is,” Matt Tepper, managing director of CBRE Global Investment Partners told The Wall Street Journal.
Medical office building owners have become the beneficiaries of the rising costs in the healthcare industry because it’s a less expensive atmosphere for doctors to perform a lot of their procedures. Healthcare systems have also created incentives to have procedures done at buildings where patients are able to walk in and out on the same day.
According to Kayne Anderson managing partner Al Rabil, any procedure that can be scheduled is more cost efficient when it is performed outside of a hospital.
The deal was attractive to CBRE Global because the sellers have quality contacts in hospitals and among doctor groups, plus the portfolio currently has a 95% occupancy rate, which is a 15% increase from when Kayne Anderson and MB Real Estate bought it, according to Rabil.
The venture has the “relationships to understand how health systems are using real estate and can help stay in front of some of the trends,” Tepper told The Wall Street Journal.
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