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Feature Story: How to find MOB opportunities in a crowded market

Panelists at GlobeSt. conference say pinpointing a strategy is the key

By John B. Mugford

The “Notable Deals & Investment Strategies for 2020 and Beyond” panel discussion featured (from left to right): moderator John Chang of Marcus & Millichap, Jason Signor of  Caddis, Darryl Freling of MedProperties Realty Advisors and Caroline Chiodo of HTA. (HREI photo)

It has become obvious that investors of all types and sizes are keenly aware of the potential upsides of investing in healthcare real estate (HRE) — medical office buildings (MOBs) in particular.

And yet, at a time when investment yields, or capitalization (cap) rates, for MOB acquisitions and developments have been at historic lows in recent years — falling even further in 2019 — competition remains rabid for the product type, making it a difficult market to enter.

In addition, the healthcare industry itself is in a state of flux, making investing in the space more complicated than ever.

“The business model for the delivery of healthcare is changing,” said Jason Signor, CEO and partner of Dallas-based HRE firm Caddis. “So, underwriting the healthcare side of this, the tenant side of this, with an everchanging delivery model … providers are making less money while construction costs are going up and, therefore, rents are going up. The underwriting part can be very treacherous. The sector still provides great opportunity, but it is difficult to implement and execute.”

“Look, just because an asset class may be recession proof and have great demographic drivers doesn’t mean it’s without risks. Healthcare real estate has its own risks. Our tenants are healthcare providers and as a real estate investor … we have to ask, ‘Can our tenants pay their rent today, and tomorrow? The tomorrow part is the hard part.’”

Mr. Signor was part of a panel session titled “Notable Deals & Investment Strategies for 2020 and Beyond” at the annual GlobeSt. Healthcare Real Estate (HRE) Conference in Scottsdale, Ariz.,  Dec. 3-4.

The panel, titled “Notable Deals & Investment Strategies for 2020 and Beyond,” was moderated by John Chang, senior VP of Research Services with Marcus & Millichap Inc. (NYSE: MMI). The other panelists were: Darryl E. Freling, managing principal with MedProperties Realty Advisors; and Caroline Chiodo, senior VP of acquisitions with Healthcare Trust of America (NYSE: HTA), a publicly traded real estate investment trust (REIT).

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