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Industry Pulse: Two more MOB portfolios hit the market

Offered together, the Flagship and HSA packages total 479,092 square feet

The Flagship Medical Office Portfolio includes eights assets totaling 335,864 square feet in Virginia and the Carolinas. (Photo courtesy of JLL)

If 2017 was “The Year of the Portfolio” with respect to the total dollar volume of multi-asset medical office building (MOB) transactions, 2018 might be shaping up to be “The Year of the Portfolio” in terms of the sheer number of MOB portfolios being offered for sale — and ultimately changing hands.

The medical office portfolios being marketed this year might include fewer assets, perhaps eventually selling for less money overall. But it seems like we’re seeing more of them, as yet another pair of multi-facility packages hit the market this week.

The portfolios, which are being offered as a pair or separately, are:

■ The Flagship Medical Office Portfolio, an eight-building package with a total of 335,864 rentable square feet of space in Virginia, North Carolina and South Carolina. The portfolio has a total occupancy rate of 83.4 percent, with “strong contractual rent growth and value creation opportunity,” according to the Healthcare Capital Markets Group with Jones Lang LaSalle (NYSE: JLL), which is marketing the portfolio.

■ The HSA PrimeCare Medical Office Portfolio, a collection of four MOBs with a total of 143,228 square feet of rentable space in Greater Minneapolis and Greater Chicago, including northwest Indiana. The occupancy rate is 93.6 percent, with 7.7 years of weighted average remaining lease term and “strong contractual rent growth,” according to the JLL team, which is marketing this portfolio as well.

According to professionals involved in the sector, portfolios of this scale are exactly what many of the larger investors — including those new to the space as well as private equity funds, institutions and others — are looking for.

The portfolios bear the names of companies involved in their ownership, Charlotte, N.C.-based Flagship Healthcare Properties and Chicago-based HSA PrimeCare, both of which are well-known healthcare development and full-service firms.

While JLL did not name the ownership groups involved in the sale of the Flagship portfolio, a perusal of the properties as they are listed by real estate research firm Real Capital Analytics (RCA) Inc. indicates that they were acquired, mostly one at a time or in small portfolios, by Flagship in joint venture (JV) partnerships with San Antonio-based USAA Real Estate, the real estate investment arm of USAA Capital Corp.

The HSA PrimeCare Medical Office Portfolio includes four assets totaling 143,228 square feet in the Minneapolis and Chicago metros. (Photo courtesy of JLL)

The same goes for the HSA PrimeCare portfolio, whose properties, according to RCA, were acquired in recent years by JV partnerships of the company and USAA, which had formed a number of acquisition partnerships with HRE firms throughout the country.

According to JLL, the Flagship portfolio, a combination of on- and off-campus facilities, “has strong alignment with well-regarded non-profit and for-profit healthcare providers such as Charlotte-based Atrium Health; Nashville, Tenn.-based HCA Inc.; Winston-Salem, N.C.-based Novant Health, which has 15 hospitals; and a number of “market-leading, multi-location physician specialty groups.”

The HSA PrimeCare portfolio’s MOBs are in Plymouth, Minn., Tinsley Park, Ill., and northern Indiana cities near Chicago.

JLL says all of the buildings were completed after 2002 and have strong alignments with Oak Brook, Ill.-based Advocate Health Care and Minneapolis-based Fairview Health.

The offerings come on the heels of several large portfolio sale closings earlier this year, highlighted by the first quarter (Q1) purchase of a $585 million, 17-MOB package by a joint venture of Chicago-based Heitman and Denver-based NexCore Group, as well as recent portfolio offerings. Three separate, large portfolio offerings that hit the market in April have yet to close; combined, they could add upwards of $1 billion to the 2018 MOB sales volume.

The JLL team marketing the Flagship and HSA portfolios comprises Mindy Berman, Steve Leathers, Daniel Turley, Justin Hill and Brian Bacharach.

For more information on the Flagship portfolio offering, please visit HREInsights.com.

For more information on the HSA PrimeCare portfolio offering, please visit HREInsights.com.

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