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Feature Story: Investors are flocking to the MOB/HRE space

BOMA panel takes a closer look at growing investor demand, rising prices for the asset type

By John B. Mugford

“The Investor Flight Toward Healthcare Real Estate” panel at the BOMA MOBs conference featured (from left to right): Pratik Patel of Wafra, Jennifer Wong of AEW, Vikram Malhotra of Mizuho Americas, Mindy Berman of JLL and moderator Ben Appel of Newmark. (Photo courtesy of BOMA)

Currently in the growing and highly visible medical office building (MOB) space, a couple of questions seem to be garnering most of the attention.

One of those is: Will the influx of new capital, including large amounts from deep-pocketed institutional investors and investment managers, slow down in the near future?

The other is: Will capitalization (cap) rates, or first-year expected returns, stop their unprecedented compression to historic lows, even amid rising inflation and potentially higher interest rates, anytime soon?

The answers seem to be “no” and “no,” according to a panel discussion that took place at BOMA International’s 2021 Medical Office Building + Healthcare Real Estate Conference held Nov. 1-3 at the Omni Dallas Hotel.

The session was titled “The Investor Flight Toward Healthcare Real Estate” and the discussion heavily focused on growing institutional investment in the MOB and HRE space, as well as soaring pricing and falling yields for the product type.

The panelists taking part in the session included two MOB sales brokers, two healthcare real estate (HRE) specialists with institutional investment firms that are somewhat new to the space, and a Wall Street research analyst who covers public companies. They were:
■ Moderator Ben Appel, executive managing director with the Healthcare Capital Markets group of Newmark Group Inc. (Nasdaq: NMRK);
■ Mindy Berman, senior managing director and head of the healthcare capital markets platform with Jones Lang LaSalle Inc. (NYSE: JLL);
■ Vikram Malhotra, managing director and research leader for Mizuho Americas;
■ Pratik Patel, director with New York-based Wafra Inc., which in late 2020 formed a $550 million joint venture (JV) partnership with Welltower Inc. (NYSE: WELL) that entailed Wafra acquiring an 80 percent ownership in 24 MOBs; and
■ Jennifer Wong, VP of acquisitions with Boston-based AEW, which has formed partnerships with firms in the sector, including a recently formed JV with Nashville, Tenn.-based Montecito Medical Real Estate that plans to spend up to $1 billion in coming years on acquiring MOBs.

Early in the session, Ms. Berman provided some data indicating how strong investor demand has become for MOBs, noting that she has been “surprised at

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