Business Specialties
Investment
Jul 21, 2009
By: Barbra Murray, Contributing Editor
Grubb & Ellis Healthcare REIT Inc., currently among the minority of real estate investment concerns that have the cash on hand to make big purchases, has signed an agreement to acquire a 16-building healthcare property portfolio in metropolitan Greenville, S.C., from Greenville Hospital System. The $161.6 million deal will allow the hospital to lease back the portions of the 855,000-square-foot portfolio of medical office and healthcare related facilities it currently occupies.
Five of the assets are located at GHS's Greenville Memorial Medical Campus and an additional four are located at the health organization's Patewood Medical Campus. Two medical office buildings are part of the Greer Medical Campus in Greer, and the remaining five buildings are located at off-campus sites. The facilities, which involve a combination of fee simple interests and leasehold interests, are fully occupied, with GHS making its home in 83 percent of the portfolio, and medical specialists occupying 17 percent under long-term lease agreements. As per the deal, GHS will continue to occupy its space under 10- and 15-year leases.
Grubb & Ellis Healthcare plans a long-term association with the health organization. "GHS has a significant market share, it has 70 percent of its market, so it's a dominant provider and that will allow us to go forward with new real estate developments in the future," Mark D. Engstrom, executive vice president for acquisitions, told CPN. "We'll be in a position to help them deliver those new developments as they need them."
The group of healthcare assets was openly marketed, but the inhospitable credit markets limited the pool of prospective investors. "There was not as much competition as there would have been 18 months ago," Engstrom said. "Now, buyers who require debt to acquire cannot access it, so that just leaves a small pool of investors who can buy with cash, of which we are one."
More major portfolio purchases by Grubb & Ellis Healthcare, which will be renamed Healthcare Trust of America Inc. in August, are likely on the horizon. "We're very interested in selecting high quality providers to partner with, so it will be a relationship-driven acquisition strategy going forward." And markets from one coast to the other are fair game. "We want to focus more on partners than geography, but we'll be looking at larger metropolitan areas rather than suburban or rural areas."
What competition that does exist is unlikely to go away anytime soon given that the medical office property sector is one of the more successful in commercial real estate today. The current average vacancy rate for medical office properties is 11.6 percent, compared to 15.2 percent for traditional office properties, according to Marcus & Millichap Real Estate Investment Services' recent Healthcare Reform Outlook report. And demand in the market is only going to increase due to the fact that, as noted in the report, even a partial success of the White House's goal of achieving nationwide health coverage will spur the need for additional facilities.
By: Barbra Murray, Contributing Editor
Grubb & Ellis Healthcare REIT Inc., currently among the minority of real estate investment concerns that have the cash on hand to make big purchases, has signed an agreement to acquire a 16-building healthcare property portfolio in metropolitan Greenville, S.C., from Greenville Hospital System. The $161.6 million deal will allow the hospital to lease back the portions of the 855,000-square-foot portfolio of medical office and healthcare related facilities it currently occupies.
Five of the assets are located at GHS's Greenville Memorial Medical Campus and an additional four are located at the health organization's Patewood Medical Campus. Two medical office buildings are part of the Greer Medical Campus in Greer, and the remaining five buildings are located at off-campus sites. The facilities, which involve a combination of fee simple interests and leasehold interests, are fully occupied, with GHS making its home in 83 percent of the portfolio, and medical specialists occupying 17 percent under long-term lease agreements. As per the deal, GHS will continue to occupy its space under 10- and 15-year leases.
Grubb & Ellis Healthcare plans a long-term association with the health organization. "GHS has a significant market share, it has 70 percent of its market, so it's a dominant provider and that will allow us to go forward with new real estate developments in the future," Mark D. Engstrom, executive vice president for acquisitions, told CPN. "We'll be in a position to help them deliver those new developments as they need them."
The group of healthcare assets was openly marketed, but the inhospitable credit markets limited the pool of prospective investors. "There was not as much competition as there would have been 18 months ago," Engstrom said. "Now, buyers who require debt to acquire cannot access it, so that just leaves a small pool of investors who can buy with cash, of which we are one."
More major portfolio purchases by Grubb & Ellis Healthcare, which will be renamed Healthcare Trust of America Inc. in August, are likely on the horizon. "We're very interested in selecting high quality providers to partner with, so it will be a relationship-driven acquisition strategy going forward." And markets from one coast to the other are fair game. "We want to focus more on partners than geography, but we'll be looking at larger metropolitan areas rather than suburban or rural areas."
What competition that does exist is unlikely to go away anytime soon given that the medical office property sector is one of the more successful in commercial real estate today. The current average vacancy rate for medical office properties is 11.6 percent, compared to 15.2 percent for traditional office properties, according to Marcus & Millichap Real Estate Investment Services' recent Healthcare Reform Outlook report. And demand in the market is only going to increase due to the fact that, as noted in the report, even a partial success of the White House's goal of achieving nationwide health coverage will spur the need for additional facilities.
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