Transactions (August 2006)

Triple Net chases another breed of MOB

FIRM SNAPS UP $175 MILLION IN ADMINISTRATIVE SPACE USED BY HEALTH INSURERS

 

By Murray W. Wolf

 

Maybe they’re not medical office buildings (MOB) in the usual sense – with physician offices, outpatient surgery, imaging, labs or pharmacies.

But when the buyer is a major national real estate firm making a big push into the medical office sector, when the properties house some of nation’s largest health insurers, and when recent acquisitions total more than $175 million – then the transactions are just too significant to ignore.

Triple Net Properties LLC of Santa Ana, Calif,, which only recently entered the healthcare real estate market, announced July 25 that it has acquired a Las Vegas office building occupied by some of the administrative offices of Sierra Health Care Services Inc. (NYSE: SIE), the parent company of Nevada’s largest health maintenance organization (HMO) and its largest medical group. That followed a June 30 announcement that it had acquired an Indianapolis office complex occupied by some of the administrative offices of Wellpoint Inc. (NYSE: WLP, formerly known as Anthem Insurance Cos. Inc.), the nation’s largest health insurer.

The purchase prices for the two transactions were not disclosed. But published reports say the Las Vegas property sold for $74.25 million and the Indianapolis property fetched $100.8 million.

The Las Vegas property, at 2716 N. Tenaya Way, is a six-story, 204,000 square foot, Class A office building that is part of Sierra’s corporate campus, and is connected to the building that houses its executive offices. The property also includes a five-story parking structure and a 1.6-acre frontage pad. The building was constructed in 1998.

The Indianapolis property, at 220 Virginia Ave., is a two-building, five-story office, 562,000 square foot complex on 10.38 acres. It includes surface parking adjacent to the buildings, and comes with a long-term agreement with the city of Indianapolis for more than 2,000 spaces at the adjacent Conseco Fieldhouse garage. The property was constructed in 2000 as a build-to-suit for Anthem.

Both buildings are reportedly 100 percent leased by their respective users.

The Las Vegas property was purchased from an subsidiary of an undisclosed publicly traded healthcare REIT represented by Kevin Shannon of CB Richard Ellis. Danny Prosky and Tania Konishi of Triple Net represented the buyer. Financing was provided by Wachovia and was arranged by Eric Tupler and Kirk Danley of CBRE | Melody.

The Indianapolis property was purchased from undisclosed institutional investors advised by Prudential Real Estate Investors, which was represented by John Merrill and Andrew Banister of CB Richard Ellis. Mr. Prosky and Ms. Konishi of Triple Net represented a group of tenant-in-common (TIC) buyers. Financing was provided by LaSalle Bank and was arranged by Mr. Tupler and Mr. Danley of CBRE | Melody.

The Las Vegas and Indianapolis purchases are the latest – and largest – transactions in Triple Net’s drive to acquire healthcare-related properties other than MOBs.

In May, Triple Net announced that it had acquired 3050 Superior Drive N.W., a 205,000 square foot, two-story MOB, light manufacturing and warehousing facility in Rochester, Minn. The purchase price was $36.25 million, according to published reports.

The Minnesota property is 100 percent leased on an absolute net basis by the Mayo Clinic and used for medical education and research. Mayo is a not-for-profit foundation that provides health care, most notably for complex medical conditions, through the famed Mayo Clinic in Rochester. The building was built in 2000 and includes about 26 acres of land that is suitable for potential expansion.

The Minnesota property was purchased from CEL (MN) QRS 14-40 Inc., a Delaware corporation, which was represented by Jeffrey Evans of Trump Mortgage. Ben Tapper of Eastern Consolidated and Steve Leathers of Triple Net’s acquisitions team represented the TIC buyers. Financing was provided by LaSalle Bank and was arranged by Mr. Tupler.

With the Las Vegas purchase, Triple Net Properties says it now manages more than 30.9 million square feet of commercial properties throughout the West with a combined value of over $4.2 billion.

WRIT closes on

$67 million MOB

portfolio acquisition

ROCKVILLE, Md. – Washington Real Estate Investment Trust (WRIT) closed last month on the fourth and final property included in its previously announced its $67 million acquisition of the four-building, 175,289 square foot, Class A Shady Grove/Plumtree MOB portfolio in suburban Washington.

WRIT acquired two buildings in April, when the transaction was first announced. The third closed in June, according to published reports.

Jim Kornick and Gerald Burg, senior directors in the Washington office of Marcus & Millichap’s Healthcare Real Estate Group, along with Matt Clinebell, a healthcare real estate investment specialist also in the firm’s Washington office, represented the seller, a Maryland-based private investor.

“WRIT acquired these assets because of their stability, location and to continue the expansion of its portfolio,” Mr. Kornick said in a prepared statement. “The portfolio is located in affluent Montgomery County, which continues to grow at a rapid rate. Furthermore, its population of aging baby boomers will bolster the regional medical office building market for years to come.”

Three of the MOBs – Shady Grove Medical Building, Shady Grove Professional Center and Shady Grove Professional Center II – are in Rockville, Md. Encompassing a total of 141,325 square feet, the Class A assets sold for a cap rate of 5.9 percent and $420 per square foot – reportedly a record price per square foot for that submarket. Since delivery, the properties have been 100 percent leased. All three properties are within a quarter mile of the Shady Grove Adventist Hospital campus and within a mile of Interstate 270.

Located in Bel Air, Md., the 33,431 square foot Plumtree Professional Center sold for a more modest $230 per square foot. The MOB is anchored by a comprehensive radiology facility, and is within three miles of the Upper Chesapeake Medical Center. 

For the Record

Medical Properties Trust Inc. (NYSE: MPW) last month completed a $65 million private placement of 7.871 percent senior unsecured notes due 2016. The notes were issued by the company’s operating partnership, MPT Operating Partnership LP and guaranteed by the company. The net proceeds from the notes, after deducting fees and expenses, are expected to be used primarily for funding future acquisitions of healthcare real estate… Cirrus Group of Plano, Texas, recently announced the acquisition of Plano Pediatric Medical Pavilion. The purchase price was not disclosed. The multi-specialty pediatric medical office complex houses a surgical center, a diagnostic imaging center, an urgent care center and other physician practices focused entirely on pediatric care. Completed in 2005, Plano Pediatric Medical Pavilion is a two-story, 82,000 square foot, Class A MOB. The property is located at 7000 West Plano Parkway, near the Dallas Tollway, it is an independent medical facility and is not associated with any specific area hospital, although has tenancy from Presbyterian Hospital of Plano. Cirrus Group says it is making improvements to the facility to enhance its appeal to patients, including the addition of “kid-friendly” play areas intended to differentiate the facility from MOBs without a pediatric focus… Altera Development Co. of Dallas recently purchased Deaconess Hospital’s two three-story MOBs totaling about 113,000 square feet in northwest Oklahoma City for $9.8 million, and plans to start work this fall on a vertical expansion. Construction services will be provided by the Oklahoma City office of Flintco Inc. The Dallas office of Holliday Fenoglio Fowler LP arranged financing for the acquisition and expansion… Marcus & Millichap Capital Corp. (MMCC) recently arranged $4.626 million of debt financing for the refinance of a 40,000 square foot MOB in Santa Ana, Calif. Adam Petriella, director in the MMCC West Los Angeles office, arranged the financing for the borrower, a private investor. The loan was provided through a conduit lender at a 70 percent loan-to-value ratio and a 6.2 percent interest rate. The loan is fixed with a 10-year term and a 30-year amortization schedule. q

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