Transactions (April 2006)

New Jersey MOB sells for $87.5 million

LONG-TERM MASTER LEASE, PROFITABLE HOSPITAL DRIVE HIGH PRICE

 

By John Mugford

 

On the surface, the $87.5 million paid for the 252,000 square foot Hackensack University Medical Plaza in Hackensack, N.J. – more than $347 per square foot – might seem high.

But the seller, White Plains, N.Y.-based Seavest, and the broker, New York-based Granite Partners LLC, received a “high number” of offers for the nine-story medical office building (MOB) and attached 1,700 space parking structure, according to Jeffrey Cooper, senior managing director with Granite Partners. Among those bidding for the property were institutions, public companies, private companies, financial firms, foreign investors, and others.

The eventual leasehold buyer and high-bidder was Miami-based ProMed Properties, a wholly owned subsidiary of Gazit-Globe, an Israeli-based real estate company listed on the Tel Aviv stock exchange.

ProMed closed on the property in February for $87.5 million, marking the first U.S. medical office acquisition for the firm. It is not likely to be ProMed’s last acquisition, however, as the company’s board of directors in late 2005 approved $300 million to be invested in MOBs in the United States, according to a company press release.

“The deal might look pretty pricey and the cap rate pretty low,” says Mr. Cooper. “But the buyer was able to straight-line the bumps in the rents over the term of the master lease and come up with an average cap rate of about 8 percent. That provides steady returns over the long haul, almost like a bond with some tax incentives for the buyer.”

According to ProMed officials, the company will finance about 30 percent of the acquisition through its own resources, with the balance being funded through the assignment of an existing loan on the MOB.

The Class A medical office facility was built in 1998 by Seavest, a privately held investment firm, and is attached to Hackensack University Medical Center, a 683-bed teaching and research hospital affiliated with the University of Medicine and Dentistry of New Jersey–New Jersey Medical School. Mr. Cooper adds that the hospital is financially sound, as it posted net revenues of $873 million in 2004 and has an “A” credit rating from Fitch and an “A2” rating from Moody’s.

The MOB is master leased on a triple-net basis by the hospital, which has retained ownership of the land underneath the outpatient facility. The MOB houses several of the hospital’s departments, as well as doctors and an ambulatory care center. ProMed’s building and land leasehold rights run through 2041, according to the company’s news release.

Mr. Cooper adds that ProMed is likely to be a long-term holder of the property.

Windrose to acquire

three Texas MOBs

for $81.3 million

 

INDIANAPOLIS – Windrose Medical Properties Trust (NYSE: WRS) announced that it has executed contracts to acquire a portfolio of three medical properties with a total of 231,530 square feet in Texas for $81.3 million, subject to certain conditions of the agreement.

The sellers, which were not divulged, have agreed to receive about $5.6 million of the purchase price in units of limited partnership in Windrose Medical Properties LP, Windrose’s operating partnership. Each unit is valued at $15.

The portfolio consists of a 92,420 square foot long-term acute-care (LTAC) hospital in the Houston market; a 79,040 square foot integrated medical plaza in the Houston area with an ambulatory surgery center specializing in bariatrics, imaging and physician office space; and a 60,070 square foot medical plaza in San Antonia that includes an ambulatory surgery center (ASC).

The transaction is expected to close in the second quarter of this year. According to Windrose officials, all of the properties are debt-free. Windrose says it plans to pursue various debt sources, including placing property level debt of about $48 million to $50 million on the properties at the time of the acquisitions.

Windrose currently has available lines of credit, including a recently announced amended and restated senior secured revolving credit facility, providing the company with up to $30 million in available credit.

NexCore, RREEF

seal deal for

Chicago MOBS

DENVER – Medical and mixed-use developer NexCore Group of Denver and San Francisco-based real estate investment advisor RREEF have closed on two more medical office building (MOB) transactions – their third and fourth deals since announcing a joint venture (JV) partnership earlier this year.

In the two most recent transactions, NexCore, which has developed more than 3.8 million square feet of facilities, and RREEF, a unit of Deutsche Bank, closed on the recapitalizations of two MOBs on Alexian Brothers Health System hospital campuses in the Chicago area:

• § St. Alexius Medical Center MOB III, a five-story, 114,000 square foot facility on the campus of St. Alexius Medical Center in Hoffman Estates, Ill.
• § Alexian Brothers Medical Center MOB, a three-story, 65,000 square foot building on the campus of Alexian Brothers Medical Center in Elk Grove Village, Ill.

 

The transactions follow the Jan. 26 announcement of the recapitalization of Dry Creek Medical Campus, an 11-acre ambulatory care center in Englewood, Colo., and the Feb. 26 announcement of the recapitalization of Avista Two Medical Plaza, a three-level, 84,000 square foot Class A MOB on the campus of Avista Adventist Hospital, in Louisville, Colo.

NexCore developed the Alexian Brothers MOBs and will continue to provide leasing and property management services, according to Peter Kloepfer, senior managing director with NexCore. Mr. Kloepfer adds that NexCore also created a financing structure that gives physicians a chance to invest in the ownership of the MOBs — a tool that Mr. Kloepfer says helps providers recruit and retain doctors.

The NexCore-RREEF partnership plans to engage in further transactions, according to Mr. Kloepfer, as its agreement calls for recapitalizing, developing and acquiring a total of $500 million in medical real estate during the next two to three years.
Global Investment

closes on third

MOB in U.S.

KUWAIT – Kuwait-based Global Investment House’s U.S Real Estate Fund recently completed its third MOB acquisition in the United States.

On March 14, Global closed on the acquisition of Marietta Medical Center in Marietta, Ga., for a total investment of $21.1 million – with the fund’s participation being equivalent to $7.4 million. According to Sameer A. Al-Gharaballi executive vice president for global, the acquisition is in keeping with the fund’s management strategy and a continuation of its investments.

The five-story, 98,531 square foot Marietta Medical Center was built in 1989 and renovated in 2002. The MOB is located on a five-acre parcel across the street from WellStar Kennestone Hospital, a 493-bed regional hospital that serves a region of about 600,000 people. The MOB is connected to a three-level parking deck with 413 spaces.

In a press release, Mr. Al-Gharaballi stated that the average annual cash income on the acquisition is about 7.4 percent, with the first year cash income projected at 6.2 percent, distributed monthly.

 

 

PHT Holdings

acquires MOB

in Missouri

DALLAS – PHT Investment Holdings LLC, a joint venture (JV) between Partners Health Trust, a wholly-owned subsidiary of Trammell Crow Company, and a prominent state retirement system advised by Morgan Stanley Real Estate, has acquired Health Pavilion, a 65,000 square foot medical office building (MOB) in Columbia, Mo.

Financial details were not disclosed.

Health Pavilion is a Class A, on-campus MOB attached to Columbia Regional Hospital. It is 100 percent occupied by the University of Missouri Health Care on a long-term lease. Trammell Crow Company will manage the property.

PHT was formed to acquire, on a long-term basis, on-campus MOBs from health care systems around the country. The fund is led by Trammell Crow’s Senior Managing Director Tom McNearney and Senior Vice President of Acquisitions Bill Dagar. In addition to looking for acquisition opportunities, Trammell Crow Healthcare Services currently has several developments in the pipeline in large markets, such as the Dallas Metroplex, Chicago, Detroit, Houston, Philadelphia, San Antonio, Seattle, and Raleigh.

For the Record

Zatco PM LLC, an Atlanta-based investment firm, recently acquired the 28,400 square foot Prestly Mill Medical Center in Douglasville, Ga., west of Atlanta. Terms of the sale were not disclosed. Tony Swann of CB Richard Ellis, Gary Lee and Andrew Murphy assisted in the transaction… The Myers Y. Cooper Co. of Milford, Ohio, recently purchased Eastgate Bethesda, a 28,264-square foot MOB on Eastgate Boulevard in Cincinnati, Ohio. Terms were not disclosed. The three-story MOB is located close to the Eastgate Mall and has an occupancy rate of 92.3 percent. Randy Cooper provided in-house representation for Myers Y. Cooper. q