After nearly $600M in acquisitions in 2020, its current pipeline is bigger than ever
By John B. Mugford
As part of its very busy December 2020, Nashville, Tenn.-based Montecito Medical Real Estate acquired three MOBs in three Ohio cities that are fully occupied by Sandusky-based Northern Ohio Medical Specialists (NOMS), including this facility in Sheffield. (Photo courtesy of Montecito)
Although it looks like 2020 is going to turn out to be another solid year for medical office building (MOB) sales despite complications, and a market-wise pause, caused by the COVID-19 pandemic, the year behind us turned out to be a very strong one for one of the sector’s most active private equity investors.
In fact, Nashville, Tenn.-based Montecito Medical Real Estate had its biggest year for MOB acquisitions in its 15-year history, acquiring 55 facilities for a total of about $597 million, Glenn Preston, the company’s chief operating officer, tells HREI™.
Not only was 2020 Montecito’s biggest year, but December was the firm’s largest month ever for making MOB acquisitions, as it closed on 11 transactions for a volume equaling about one-third of what it invested during the entire year, notes Mr. Preston, who joined the company in January 2020 after spending 16 years as an executive VP with HCP Inc., now Denver-based Healthpeak Properties Inc. (NYSE: PEAK).
So why did Montecito have such a strong 2020, a year in which the MOB sales market certainly took a pause during the early stages of the pandemic?
“We have a unique business model that combines business development and marketing functions in which we stay in front of and actively solicit business with physician practice groups, both large and small, and healthcare development firms,” notes Mr. Preston.
“And we’ve kept that up throughout the past year and during the pandemic. COVID certainly had an impact on volumes in that March, April and May time frame, in large part because no one could go into a building and many places were shut down. Discussions continued during that time, as did our business development and marketing efforts, but those efforts took on different forms, including Zoom calls, virtual tours and other methods for getting business done.”
The firm, which makes its investments with a variety of institutional capital sources, is well-known for making acquisitions of all sizes.
Its largest acquisition in 2020 came in late October, when the company acquired the 138,200 square foot 84 South MOB anchored by Milwaukee-based Aurora Health Care in Greenfield, Wis., outside of Milwaukee, for $74 million.
HREI reported the transaction Nov. 11, noting that the five-story MOB/surgery center includes a 400-stall parking structure and is part of a 48-acre mixed-use project in Greenfield. The seller was Milwaukee-based Cobalt Partners, which delivered the MOB in 2019.
For the most part, most of Montecito’s purchases in 2020 involved single assets and/or smaller portfolios.
Starting in early December, the firm made three significant and separate purchases in a span of nine days for MOBs totaling $87 million. The purchases of single MOBs were in New Mexico ($27.8 million), Ohio ($35.4 million) and North Carolina ($27.3 million), according to HRE data firm Revista.
Showing the range of deals it executes on, in mid-December it acquired a 15,050 square foot MOB in Richmond, Va., occupied by a physician’s group specializing in allergy and asthma services. The price was $5.25 million.
Looking to the year ahead, Chip Conk, the CEO, says Montecito has its strongest acquisitions pipeline, including letters of intent (LOI), heading into a new year in company history.
“We’ve built our company on performing as we say we’re going to perform, and word of mouth testimonials among those physician groups has been the key to our success,” he says. “While we work with a variety of clients and sellers, providing customized real estate solutions for physician groups – which vary from very large, sophisticated market leaders with 150 or even more doctors to smaller groups — has been a big priority of ours. Having their trust, and having them tell other doctors about what we can do, has proven to be very valuable.”
As Montecito continues to grow its portfolio of properties – it has made acquisitions totaling more than $4 billion and 6 million square feet of space in 31 states – it also has plans to grow the number of professionals it employs. In 2020, the firm added 10 people – it now employs 30 — and expects to grow by another 20 percent in the year ahead.
The full content of this article is only available to paid subscribers. If you are an active subscriber, please log in. To subscribe, please click here: SUBSCRIBE
