Feature Story: The cloudy economy has a silver lining: higher cap rates

‘This could be a really exciting time’ and ‘a buying opportunity,’ InterFace panelists say

Last week’s InterFace Healthcare Real Estate West “State of the Industry” panel discussion included (from left to right): John Pollock of Meridian, PJ Camp of H2C, Jake Rohe of PMB, Chris Bodnar of Prescriptive Capital, Chris Morgan of Big Sky Medical and the moderator, Sushil Puria of Cushman & Wakefield. (Photo courtesy of InterFace Conference Group)

LOS ANGELES – Perhaps Chris Bodnar best summed up what professionals and firms involved in healthcare real estate (HRE) have gone through during the past year.

The longtime, well-known HRE facility broker who is now the CEO of Denver-based Prescriptive Capital, which provides capital to operating partners and developers of medical office, life sciences and senior living facilities, said the HRE space has endured what psychologists consider to be the classic stages of acceptance.

“At first, you are shocked,” Mr. Bodnar said. “Then, you go into denial, and then … (you) get angry. And then, you kind of get to the acceptance stage.

“And I think we’re closer to that acceptance phase now,” he said, because we might be also closer to understanding what’s ahead for where interest rates (are heading) – which, of course, has a huge impact on the economy, including the prospects for HRE.

Mr. Bodnar was one of six panelists who took part in the opening panel discussion at the 13th Annual InterFace Healthcare Real Estate West conference, which was held Feb. 1 at the Omni Los Angeles. The session, titled, “State of the Industry Report & 2023 Outlook,” was moderated by Sushil Puria, executive director of capital markets with Cushman & Wakefield (NYSE: CWK). In addition to Mr. Bodnar, the panelists included:
■ PJ Camp, principal and co-founder of New York-based H2C Securities Inc.;
■ Jake Rohe, managing partner and president of San Diego-based PMB;
■ Chris Morgan, senior manager of investments with Dallas-based Big Sky Medical Real Estate; and
■ John Pollock, president of Walnut Creek, Calif.-based Meridian Medical Real Estate Development.

At the time of the panel discussion, it was anticipated that the U.S. Federal Reserve Bank was about to announce yet another interest rate hike – which it did. After raising the federal funds rate seven times in 2022, the Fed indeed raised the rate again the next day (Feb. 2), to 4.58 percent, an increase of 25 basis points (bps). And, in its ongoing quest to reduce inflation, the Fed has stated that additional rate increases are all but certain.

“But at least we have some transparency of where they’re going to stop,” Mr. Bodnar said. “You know, I don’t think anybody’s thinking that they’re going to pivot anytime soon,” which, he added provides clarity and allows firms to move forward.

Although the past year has certainly involved plenty of “turmoil” in the HRE sector, as well as in other industries and real estate sectors, Mr. Puria asked the panelists to talk about how the market is faring now despite “rising interest rates, high inflation, tighter monetary policy – doom and gloom, as some might say.”

In response, the panelists acknowledged that although the industry has faced plenty of impediments in the past year, they remain optimistic.

For example,

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