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Cover Story: Kaiser reaffirms its hold as top HRE owner

Revista report says top 50 owners hold property valued at $377.6B

ARNOLD, Md. – The country’s reigning king of medical real estate ownership, Oakland, Calif.-based Kaiser Permanente, continues to grow its portfolio and strengthen its hold on the crown.

For the fifth year in a row, Kaiser Permanente sat atop the annual “Top 50 Owners of Medical Real Estate” report compiled by Arnold, Md.-based Revista, a five-year-old firm that compiles healthcare real estate (HRE) data and statistics for its members.

Revista’s most recent “Top 50” report provides a snapshot of the country’s top medical real estate owners as of the end of 2017. The report includes only entities whose portfolios are predominantly comprised of what Revista Principal Mike Hargrave calls “true healthcare” facilities, such as MOBs, hospitals, post-acute and rehabilitation facilities, skilled nursing facilities (SNFs), and others.

According to the report, Kaiser’s portfolio of gross real estate assets was worth an estimated $38.6 billion as of the end of 2017, an increase of 7 percent from 2016, when its portfolio was worth an estimated $35.9 billion.

Just as Kaiser Permanente remained in the top spot, the top five owners of medical real estate remained unchanged in 2017 compared to 2016, according to Revista.

Remaining in the second and third spots were the country’s two largest non-health system owners of medical real estate, Toledo, Ohio-based Welltower (NYSE: WELL) and Chicago-based Ventas Inc. (NYSE: VTR).

Interestingly, however, both of those publicly traded real estate investment trusts (REITs) saw the value of their portfolios shrink in 2017 when compared to 2016. Welltower’s portfolio dropped about 6.2 percent, to $27.3 billion in 2017 from $29 billion in 2016; the value of Ventas’ portfolio fell about 4.4 percent, to $24.7 billion in 2017 from $25.8 billion in 2016.

Just as they did a year earlier, two large health systems with national platforms rounded out the top five ownership positions.

In fourth place was St. Louis-based Ascension Health Alliance, a not-for-profit system whose nationwide portfolio was worth $18.6 billion; and, in the fifth spot, Nashville, Tenn.-based for-profit provider HCA Inc., with a portfolio worth $17.9 billion.

Overall, the combined value of the portfolios held by the top 50 owners of medical real estate increased significantly in 2017. According to the Revista report, the medical real estate owned by the top 50 owners was valued at $377.6 billion at the end of 2017, up 4.8 percent over 2016 ($360.3 billion).

Each investor class, including health systems, both not-for-profits and for profits, and the REITs grew their overall holdings,” Mr. Hargrave said. “However, the systems are primarily growing through new construction, as not-for-profits had almost $20 billion in new MOB construction in 2017 — representing 9.1 percent of existing assets — while the REITs are growing through acquisitions.”

Among the entities included in the top 50, Irvine, Calif.-based Sabra Healthcare REIT (NYSE: SBRA) experienced the largest year-over-year growth in the value of its portfolio. From the end of 2016 to the end of 2017, the value of Sabra’s portfolio grew by 176.4 percent, to $6.1 billion at the end of 2017 from $2.2 billion in 2016. Sabra moved up to the 21st spot on the Top 50 owner rankings in 2017.

In addition to making a number of large senior housing property acquisitions in 2017, Sabra, which was ranked No. 21 on Revista’s 2017 top 50, was also involved in a $3 billion merger with Chicago-based Care Capital Properties, a large owner of skilled nursing facilities (SNFs).

Also growing its portfolio significantly in 2017 was Scottsdale, Ariz.-based Healthcare Trust of America (NYSE: HTA), which saw the value of its holdings increase to $7 billion by the end of 2017 from $4.3 billion in 2016. HTA, ranked as the 16th largest owner in 2017, paid about $2.2 billion to acquire most of the MOBs sold during the year by Indianapolis-based Duke Realty Corp. (NYSE: DRE), which exited the sector.

As has been the case since Revista issued its first Top 50 owners report in 2014, the HRE ownership landscape remains dominated by hospitals and healthcare systems. However, in recent years a growing number of non-health system entities – all of which are REITs – have cracked the top 50. In 2017, 14 such companies were among the top 50, which was unchanged from 2016. Just two years earlier in 2014, however, there were just nine non-health system owners in the top 50.

To read the HREI cover story with highlights from the list of the largest HRE owners and to find out more about how you can obtain a copy of even more details from Revista, please visit RevistaMed.com.

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