Cover Story: Rethink: Investing with an impact

The rebranded Seavest seeks to make a difference in healthcare and beyond

By John B. Mugford

The leaders of the Rethink Healthcare Real Estate team include (from left to right): John Winer, David Braunstein, Douglas Ray and Malika Basheer. (Photo courtesy of Rethink)

When White Plains, N.Y.-based Seavest Inc., as it was called at the time, started strategically investing in the development of medical office buildings (MOBs) in the mid- to late 1990s, it was well ahead of its time – an innovative firm that helped rewrite the sector’s landscape.

“There really wasn’t a third-party ownership structure for MOBs back then, but we really saw the opportunity that healthcare real estate (HRE) and MOBs presented, as well as the strategy of aligning with top hospitals and health systems in stable or growing markets,” recalls Douglas F. Ray, who joined the investment firm in 1993, became president in 1998 and was named CEO in 2012.

Since its founding, Seavest has continued to grow and has gotten involved in a range of investments, including providing venture capital (VC) in areas such as education, food and others that it believes have a positive impact on society.

For those other investments, the firm used the more general name Seavest Investment Group, with Seavest Healthcare Properties concentrating on HRE facilities and MOBs. Over the years, the HRE platform has raised equity for five HRE investment funds – and is currently embarking on its sixth – through which it has invested in a total of 60 properties totaling about $2 billion. Its current HRE portfolio comprises 36 properties and more than 2.5 million square feet of space.

The wider firm also continues to be an innovator. This is reflected in its recent rebranding as Rethink Capital Partners LLC, a “multi-billion-dollar platform for impact investments” that also includes a new website and revamped logos. As part of the rebranding, Seavest Healthcare Properties is now Rethink Healthcare Real Estate LLC.

“While our name is evolving, our team and businesses remain the same,” Mr. Ray said in a news release. “We have always been financially-driven investors, rooted in social mission. Over time, it became clear that the Rethink name more clearly communicated our values and approach as a firm, and we’re excited to be unveiling this rebrand publicly.”

The rebranding, according to the firm, also involves unifying its real estate and VC arms within a single investment platform.

“Seavest has been a great name,” Mr. Ray tells Healthcare Real Estate Insights™. “We have great brand recognition, but it’s a legacy name that doesn’t really tell the whole story of our approach.

“And that approach – our investment approach in terms of healthcare real estate – has always been focused on delivering healthcare in a more cost-efficient way for health systems and providers in communities across the country. Doing so in the healthcare space really meshes well with our venture capital business, our Rethink brand, and tells a better story. And that’s why we’re bringing all of this together under the name Rethink Healthcare Real Estate and Rethink Capital Partners.”

“The firm’s real estate strategies include Rethink Community and Rethink Healthcare Real Estate,” the firm notes in the news release. “On the venture capital side, the firm includes Rethink Education and Rethink Food and supports, through back-office services including compliance, Rethink Impact. The rebranding reflects the unity of purpose the strategies share, together representing a broad view of the impact investing landscape.”

As for Rethink Healthcare Real Estate, the HRE-focused arm “will continue to invest in strategic, institutional quality medical office buildings, ambulatory facilities, and other strategic healthcare assets that uplift and advance community care.”

Jonathan (John) L. Winer, the senior managing director and chief investment officer of Rethink Healthcare Real Estate, says the firm’s goal for investing in HRE facilities has remained the same since he joined Seavest in 2008 and going back to its earlier days in the sector.

“Our mindset has always been that we are in existence to help the healthcare systems and providers succeed,” he tells HREI. “If you’re not there to help them succeed, you’re not helping yourself succeed. As we’ve gone about raising equity for our funds, we’ve always told our investors that we consider the health systems and the providers to be our clients, even though they are actually our tenants.”

Another integral member of the executive team, David Braunstein, VP of investments for Rethink Healthcare Real Estate, says the rebranding is a “natural evolution” for a firm that has always taken pride in being at the forefront of the healthcare delivery model.

“And what that means,” he says, “is that we’ve always done our best to help and assist our provider partners to rethink the way that real estate can help enable their strategies for delivering care to their patients and communities in the most productive and cost-effective ways possible.”

That mindset is also “true with our venture capital business,” Mr. Winer adds, “which is a double bottom line business,” meaning the firm seeks to both serve its clients and to deliver superior returns for its investors.

“At the end of the day, this business really only works when there’s a return for investors, and we certainly understand that,” he says. “So we aren’t – and should not be – shy about making money.

“But at the same time, we also recognize that we are able to … be successful financially because we are in business to serve the institutions that we do, and we do our best for them as well.”

History of the company

Strictly speaking, the history of what in now Rethink Healthcare dates back about 35 years. But the story really begins more than a century ago, in 1920, when brothers Abraham and Joseph Mailman founded the Utica (N.Y.) Knife and Razor Co., which was later incorporated into the Mailman Corp., which was said to be one of the country’s first conglomerates. The Mailman brothers also had a philanthropic bent, creating a charitable foundation in 1943, which continues their work today.

Seavest Inc. was founded in 1981 as a wealth management vehicle for the related Segal family of New York, with Abraham Mailman’s grandson, Richard D. Segal, as the firm’s chairman and executive director.

Rethink’s initiation into medical office development came in 1987, when it invested in the management buyout of Plano, Texas-based Mediplex Medical Building Corp. (MMBC) from Avon Products Inc. (NYSE: AVP). From 1987 through 2004, Seavest had an ownership interest in Mediplex, investing in numerous medical office projects before selling its interest back to MMBC’s management.

By the time it sold its interest in MMBC, Seavest was well-entrenched in medical real estate and was bullish on the future of the space.

Through its investments and by studying long-term trends, Mr. Ray says the firm came to realize that “we wanted to make healthcare real estate – specifically medical office at the time, from which we have since added various product types – our focus.”

The firm launched its first fund to invest in the development of MOBs in 2002 – Seavest Properties I. Its second fund, Seavest Properties II, came in 2005, with funds II-VI following in ensuing years. The funds have also been rebranded to carry the Rethink name, such as Rethink Properties VI.

Overall, the firm has invested in more than 60 healthcare properties over the years through acquisitions, partnerships with developers or both. Those investments have included ground-up developments, reconstruction projects, value-add investments and conversions of other property types into healthcare facilities.

Its portfolio of owned properties currently contains 36 facilities and more than 2 million square feet of space.

“Our investments span from medical office buildings and specialized treatment facilities to emergency healthcare spaces and other facilities supporting the path of patients to a healthy return to their homes,” the firm notes.

When the firm started investing in HRE, Mr. Ray notes, “There really wasn’t a third-party ownership structure back then, but we really saw the opportunity.” Starting in the late 1990s, he continues, the firm decided to focus its real estate investments “on healthcare real estate and MOBs and the strategy of aligning with really top hospitals and health systems in stable or growing markets.”

The firm found good success in that area and concluded by the early 2000s that it wanted to expand into the HRE space and to serve even more healthcare systems and providers.

It just so happened that, starting in about 2005, Mr. Winer was part of a team with the Healthcare Real Estate Advisory team with Ernst & Young that was working with the Wisconsin division of St. Louis-based Ascension Health.

“We were advising Ascension, as they had a monetization program going on in a big effort to use more third-party capital,” he recalls, “and they were systematically going through their portfolio and identifying buildings that lent themselves to that strategy. At that time, Seavest was providing capital for a developer working on two projects in Wisconsin, one in Milwaukee and one in Mequon, for Ascension.”

Mr. Winer was brought in to help move the projects along after some issues unrelated to the health system, the developer or its capital source, Seavest, arose. He’d had plenty of experience working with Ascension and knew how the system would like to proceed.

“Doug was taking a very strong leadership role at that time in shepherding these developments through from a capital perspective,” he says. “The two of us were able to figure it all out and, well, that’s how we originally met.”

“We had invested plenty of capital into healthcare, but we knew that if we wanted to keep growing the business at that time, we needed somebody with lots of experience, integrity and of a very high caliber,” Mr. Ray recalls. “The chance to bring in someone of John’s caliber doesn’t come along very often, so we knew he would really make a difference in this sector for us. And that was really a turning point for the firm.

“That’s when we were really able to expand significantly,” he adds. “The relationships that John brought to the table transcended every area of the market: hospitals and healthcare systems, large and small, all over the country; developer relationships; and industrial relationships. It was exactly what we needed and expanded our reach considerably.”

As Seavest was looking for the right person to help it become even more of a factor in the HRE space, Mr. Winer was coming to the realization that, as the advisory side of the HRE space was becoming more and more competitive, he wanted to move into the investment, or principal, side of the business.

“It was a good time to switch and put all of those relationships I’d built up over the years to good use,” he says.

Entrenched in the HRE sector

In the early days, according to Mr. Ray, the company was “building projects, mostly MOBs, for hospitals.

“The health systems were looking for third-party financing and we were a source of financing for them. At the time, that wasn’t a big part of the way that things got financed… But we had some opportunities to do so and so we provided the capital needed to build a lot of new buildings, and that’s how we got started.

“Then, we started to acquire value-add properties and improve those and make them quality buildings for our tenants. Over time, we’ve moved into acquiring core assets, developing new, ground-up projects – so we’re basically up and down the spectrum of healthcare facilities.

“Health systems and large providers are looking for stability,” he adds. “They’re looking for somebody who can help them when they need help. And so part of kind of our operating ethos is, ‘Don’t just go in and out of properties just because you can make a quick profit.’ We prefer to dig in with health systems or providers, making a difference, being there for them when they need it. And, you know, in doing that, growing the relationships and growing the opportunities follows.”

Today, the Rethink Healthcare Real Estate portfolio totals more than 2 million square feet across 11 states. According to the HRE data firm Revista, Rethink has acquired seven properties totaling of 251,530 square feet for a total investment of $131.6 million in the past year or so.

One of its most recent investments saw Rethink, in a partnership with Chicago-based Heitman LLC, acquire a six-building, fully-occupied portfolio of micro hospitals in the Dallas-Fort Worth Metroplex with about 190,000 square feet. (Photo courtesy of Rethink)

One of its most recent investments saw Rethink, in a partnership with Chicago-based Heitman LLC, acquire a six-building, fully-occupied portfolio of micro hospitals in the Dallas-Fort Worth Metroplex with about 190,000 square feet. The facilities carry the flag of Dallas-based Baylor Scott & White Health and are operated by a joint venture (JV) of the system and Houston-based Emerus Hospital Partners.

These days, Rethink Healthcare often partners with development firms on ground-up projects. When it comes to making acquisitions, be they of value-add or core properties, the firm typically does so on its own.

However, if an operator or health system would like to establish a presence in a particular market, Rethink executives say they would certainly partner with it.

Rethink Healthcare’s main focus is “on institutional-quality properties that are strategic to successful health systems and, at times, other types of significant providers,” Mr. Winer says.

Doing its best for health systems

Among recent projects that, according to the firm’s executives, exemplifies Rethink Healthcare’s focus on providing cost-efficient, high-quality space in good locations is a repurposing project the firm financed and owns in Bethpage, N.Y., a city on Long Island about 50 miles from its headquarters office in White Plains.

Back in August 2020, after having strategized with New York-based NYU Langone Health on finding a good location on Long Island, the firm acquired a 54,000 square foot office building at 185 Central Ave. in Bethpage. The building is on a highly visible, easily accessible site just off New York State Route 135. The facility had served as a corporate headquarters facility for several firms dating back to its original construction in 1971.

Revista data indicates that the firm paid $11.2 million for the facility. The property was then part of a roughly $1 billion recapitalization of a portion of the firm’s portfolio – a majority of its properties in Fund IV – with Chicago-based Nuveen, an asset manager with about $1.2 trillion under management and a subsidiary of financial planning firm TIAA.

The firm repurposed the office building into an MOB for NYU Langone Health, an academic medical system whose flagship facility, Tisch Hospital, is in the heart of Manhattan. The MOB in Bethpage is now known as NYU Langone Ambulatory Care Bethpage.

“From locating the facility to planning and executing the work, this has been a true team effort,” Mr. Winer said at the time the facility opened in 2021, including a close collaboration with Pearl River, N.Y.-based Holt Construction.

Mr. Braunstein notes that the firm worked “holistically” with NYU Langone to understand “their needs in terms of the market and location they wanted to be in, and what service lines they wanted to provide and then worked hard to provide a real estate solution to help them accomplish that.”

An example of how Rethink works with developers on HRE projects – as it often does – can be found in Greater Washington, D.C., where the firm teamed with Dallas-based Trammell Crow Company on two projects in the 300-acre, master-planned National Harbor mixed-use development along the Potomac River in Oxon Hill, Md.

The firm and Trammell Crow completed the first MOB in National Harbor in 2019, when the multi-tenant, 95,000 square foot Medical Pavilion I opened early in the year and was 90 percent leased shortly after. Its tenancy includes the University of Maryland Medical System, numerous “significant” independent physician groups and a surgery center.

Two years later, with Medical Pavilion I established as a successful facility, Rethink and Trammell Crow opened the second MOB in National Harbor. Located adjacent to the first MOB, the 97,000 square foot Medical Pavilion II at 201 National Harbor Blvd. includes a surgery center and is anchored by Gaithersburg, Md.-based Adventist HealthCare, which plans to open the space to patients in mid-2023 and, according to Rethink, will offer “comprehensive specialty and preventative care services including an ambulatory surgery center and additional outpatient services to address critical healthcare needs in the community.”

As for 2022, Mr. Winer reports that Rethink Healthcare Real Estate “completed about $200 million worth of acquisitions, and delivered, with our development partners, four properties ranging from 60,000 square feet to more than 100,000 square feet. We also started four new development projects with our development partners.

Going beyond HRE

Although HREI is focused more on the HRE pursuits of a firm such as Rethink, Messrs. Ray and Winer are excited to point out that the company’s reach as an investor goes much further.

“There’s a lot to our story,” Mr. Winer notes, and it goes beyond the rebranding from Seavest to Rethink. In talking about our growth as an overall firm, as we now have 40 some professionals, with our main offices being in White Plains and New York City. And then we have some outpost offices, where we have some of our venture capital folks. And so, I think probably about half those people are dedicated to the real estate side of the business and the other half are more focused on our venture capital side.”

“We run the two sides of the businesses through similar fund structures,” Mr. Ray notes. “We raise institutional capital around different strategies, all of which are focused on impact, and each one of these businesses is named, or branded, with Rethink. We have Rethink Impact, Rethink Education, Rethink Food, and a hybrid between the venture capital side and the healthcare real estate side is another entity that we call Rethink Community.

“All of these brands,” Mr. Ray adds, “were really pioneers in the impact investing space, and have had significant brand recognition in their specific spaces. So that, you know, we made serious investments in ESG (environment, social and corporate governance), which there is a lot of talk around these days. We’ve been investing and focusing on ESG for a couple decades now, more than the single decade in our venture business.”

And while the firm’s VC brands might not be focused on real estate, they have had an “impact on cost and real estate, and really, our rebranding is meant to reflect that and tell the story more accurately than the Seavest name could,” according to Mr. Ray.

That VC side of the business had its start in 2012, when the company launched its education fund, now known as Rethink Education. There are now three Rethink Education funds, which the company says invest in “impactful education technology companies with the mission of helping unlock the full human potential of people who have been historically underserved.”

Overall, the Rethink VC business has raised about $700 million, and it is currently making investments from three funds and entering, on average, about two to three deals per quarter, Mr. Winer says.

Rethink Food has a mission, according to the company’s website, of helping to “transform the food system by investing in new ideas and technologies that reduce costs, increase access to healthy food and prioritize positive environmental effects. To do this we look for entrepreneurs discovering revolutionary technologies in ingredients, regenerative farming, distribution, food-as-medicine, and waste reduction.”

As for Rethink Impact, it looks to invest in firms with “mission-driven founders and teams leveraging breakthrough innovations in technology for the benefit of people and planet. Our primary focus is on companies with female CEOs, or in some cases, women in C-level roles” and has a “bias towards capital-efficient, software solutions and marketplaces solving critical problems for businesses and, ultimately, the communities they serve.”

The firms that Rethink invests in are often involved in “health, environmental sustainability, education and economic empowerment activities.”

As the firm states on its website: “For more than forty years, we have been making investments that seek to drive both financial returns and contribute to the betterment of our society, our communities and our planet.”

No thoughts of slowing down

At the time of HREI’s extensive interview with Messrs. Winer and Ray, the MOB/HRE acquisitions sector was in a bit of a slowdown. Interest rates and inflation were on the rise, debt was hard to come by, and pricing for assets was in a state of disarray, leaving many would-be investors – and sellers, for that matter – on the sidelines.

However, the professionals say Rethink Healthcare Real Estate remains active, as they have learned over the years that the HRE product type is a long-term investment and can weather most economic storms.

“The same trends that got this company into this asset class in the first place – the demographic trends, the durability of the assets and the strengths of the tenants, and other factors – are still there and are probably even more compelling today than they were back then,” Mr. Winer says.

“We’ve got the first wave of the baby boomers retiring and there’s a continual demand for healthcare services, along with such improvements in technology and medicine and the ability to do so many more procedures in outpatient facilities. So, yeah, I would say we believe in this just as much if not more today than we did 20 or 25 years ago when we started.”

Mr. Ray adds that Rethink has had a “20-year runway on our investments and, just to re-emphasize, we very much have a real commitment to this space and its long-term trends. The GDP (gross domestic product) spend on healthcare continues to grow and the population trends are there.

“And while the evolution of our investments has certainly changed, as back when we started we were building buildings that were mostly attached to the hospitals. Today, these buildings are so much more sophisticated and specialized and really are a way for the health systems to bring high quality healthcare into communities in an affordable way.

“Working with health systems to do that effectively has created an evolution of the types of products and investments we’re making these days.”

Mr. Winer adds that Rethink Healthcare currently has more “capital at our disposal than at virtually any time in our history, and that goes for the various aspects of our business, from development to value-add to core. We plan to be active in this space for a long time.” ❏

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