HREI talks with Steve Reedy, head of the bank’s Medical Office Banking unit
By John B. Mugford
Since interest rates began rising quite quickly and steeply starting in March 2022 – and with the U.S. Federal Reserve Bank raising its targeted interest rate 11 times during the subsequent 20 months – the medical outpatient building (MOB) sector’s sales volume has fallen to historic lows.
There are several reasons for this sales slowdown, including a widening gap between what sellers are willing to accept and what buyers are willing to pay. But many industry sources say that one of the biggest challenges has been securing debt for development, acquisitions and refinancings.
Those same sources indicate that the MOB and healthcare real estate (HRE) sector is not the culprit, as the property type’s fundamentals have remained as solid as ever. Yet it, too, has suffered as many large, publicly traded banks have broadly cut back on all commercial real estate lending.
To pick up some of the slack left by the larger, national banks that had for years dominated lending in the HRE sector, borrowers have had some success turning to smaller local and regional banks, as well as syndications of lenders.
However, not all big, national lenders with healthcare business units are on the sidelines. Some have remained quite active, including First Citizens Bank, part of Raleigh, N.C.-based First Citizens Bancshares Inc. (Nasdaq: FCNCA).
The bank’s Medical Office Banking unit was launched in 2016, when it was part of New York-based CIT Group, which was then acquired by First Citizens in January 2022. The unit, part of the bank’s Healthcare Finance group, has reported steady lending volumes in the MOB space during the past few years.
We recently had the chance to catch up with and ask some questions of Steven Reedy, who is based in Jacksonville, Fla., and is managing director with First Citizens and head of Medical Office Banking.
HREI: Thanks for chatting with us, Steve. To get a sense of the scope of your business, can you tell us how much loan volume the First Citizens Medical Office Banking division has completed in recent years?
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