Healthcare Realty strikes several more deals as it pushes portfolio optimization
By Murray W. Wolf
HR sold the two-story, 95,486 square foot Mercy North Campus MOB in Ankeny, Iowa, to Atlanta-based SG Property Services for $31.75 million, or $333 PSF. (Photo courtesy of SG Property Services)
Although medical outpatient building (MOB) sales volume has been historically slow during the past couple of years, the market has been enlivened by Healthcare Realty Trust (NYSE: HR), which has been pursuing an aggressive strategy of asset sales and joint ventures (JVs) since its merger with Healthcare Trust of America (HTA) in July 2022.
That strategy has shown few signs of slowing during the past few weeks. Recent MOB transactions by the Nashville, Tenn.-based healthcare real estate investment trust (REIT) have included separate sales to AW Property Co., Laramar Group, a JV of TPG Angelo Gordon & Co. and Cypress West Realty Partners, among others, followed by another portfolio recapitalization with HR’s JV partner, the New York-based private equity investment firm KKR & Co. Inc.
Several of the recent deals closed in October. Here’s a closer look at those.
■ HR sold the two-story, 95,486 square foot Mercy North Campus MOB at 800 E. First St. in the Des Moines, Iowa, suburb of Ankeny to Atlanta-based SG Property Services for $31.75 million, or $333 per square foot (PSF). The off-campus, nearly 100 percent occupied facility contains a surgery center and an urgent care. The MOB is affiliated with West Des Moines-based MercyOne, which operates 21 hospitals and is a wholly owned subsidiary of Livonia, Mich.-based Trinity Health.
■ HR sold the two-story, 80,676 square foot, 72 percent occupied Washington Center Medical Arts building on 4.13 acres at 1365 Washington Ave. in Albany, N.Y., to Boston-based Albany Road Real Estate Partners for $9.5 million, or $118 PSF, according to RevistaMed data. Albany Med Health System and St. Peter’s Health occupy 59 percent of the 72 percent-leased, multi-tenant outpatient building, according to the Healthcare Capital Markets group of Newmark Group Inc. (Nasdaq: NMRK), which brokered the sale. The MOB, which is across from the University of Albany, is part of a medical corridor of more than 1 million square feet. According to RevistaMed data, HR acquired the property for about $33.2 million in June 2022 as part of the HTA merger.
■ HR sold four properties to North Palm Beach, Fla.-based AW Property Co. Those acquisitions included a three-MOB, 162,000 square foot portfolio in Florida, including two assets in Jupiter and one in Boca Raton, for $54.56 million, or about $337 PSF. The portfolio is 98 percent occupied, with the buildings being in “dense medical clusters” or near hospital campuses. It is anchored by two health systems, with other tenants including “leading physician groups and independent healthcare service providers,” according to AW. For more on that transaction, please see “AWProperty Co. buys three MOBs” on page 14.
■ In addition, AW acquired from HR the 35,373 square foot, fully occupied Grandview Specialty Clinic Building at 1248 Huffman Mill Road in Burlington, N.C., just east of Greensboro. The price, according to RevistaMed data, was $12.5 million, or $354 PSF. The property was the final asset sold by HR as part of a larger portfolio deal through which AW acquired nine MOBs in North Carolina in late June for $99.5 million.
■ The JV partnership of New York-based TPG Angelo Gordon & Co. and Rancho Santa Margarita, Calif.-based Cypress West Realty Partners acquired from HR a five-story, 112,192 square foot MOB at 1551 S. Renaissance Towne Drive in Bountiful, Utah, a suburb north of Salt Lake City. According to RevistaMed data, the JV paid $30.7 million, or $274 PSF, for the 72 percent occupied, 20-year-old Renaissance Medical Centre.
After an apparent lull in sales activity during November, HR closed several additional deals in December. Here’s a look at the ones that were reported before this edition of HREI™ went to press in mid-December.
■ In a transaction that closed Dec. 10, HR sold the 58 percent occupied, 35,646 square foot Parma Ridge Medical Center at 6789 Ridge Road in Parma, Ohio, to the anchor tenant, Bedford Chiropractic & Effective Rehabilitation, for $1 million, or $28 PSF. HR had acquired the property for about $14.7 million as part of the HTA merger, RevistaMed data indicates.
■ On Dec. 12, Chicago-based Laramar Medical Properties closed on the acquisition from HR of a three-MOB portfolio totaling 83,078 square feet in the Greater Boise, Idaho, area. The total price for the so-called “Project Bronco” portfolio was $18.35 million, or $663 PSF, according to RevistaMed data. According to the Medical & Life Sciences team with New York-based Berkadia, which brokered the sale, the portfolio consisted of the fully occupied Eagle Road Medical Office Buildings I & II in Meridian, Idaho, which have a total of 57,043 total square feet and are next to the 167-bed St. Luke’s Meridian Medical Center, and the 26,035 square foot, 83 percent occupied North Curtis Road MOB, which is next to the 362-bed St. Alphonsus Regional Medical Center in Boise.
■ Finally, just before this edition of HREI™ went to press in mid-December, we learned that, as part of the previously announced JV with KKR, HR recapitalized at least eight more assets totaling 766,622 square feet. According to RevistaMed data, the assets from the so-called “Project Hatteras” portfolio were recapitalized for a total of $387.8 million, or $506 PSF. It included five MOBs in Texas and one each in Hawaii, Indiana and Tennessee. HREI™ will have further details on that late-breaking transaction in our next edition.
As noted, HR has pursued an aggressive recapitalization and portfolio optimization strategy since its merger with HTA about 2-1/2 years ago. That has included dispositions, recapitalizations and JVs, which REIT officials say are intended to reduce debt, fund share repurchases, unlock value and recycle capital into higher-return opportunities, and position the firm for future investments, including development projects.
According to HR’s U.S. Securities and Exchange Commission (SEC) filings, HR completed $656 million in asset sales in 2023, and realized $875 million of 2024 proceeds from JV and asset sale transactions through the end of the third quarter (Q3).
The other big news from HR recently was the Nov. 12 announcement of the resignation of President and CEO Todd Meredith. For more on that surprise announcement, please see the article below.
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