June 27, 2022

Attractive Healthcare Real Estate Sector Welcomes New Investors

Healthcare real estate’s appeal continues to attract new investors, creating a high level of competition, both amongst institutions and private investors.

Last week, Vanbarton Healthcare Group joined with Tramview Capital Management to be among the latest, announcing a joint venture targeting healthcare investments in select markets throughout the country.

The new division is targeting approximately $100 million of healthcare investments in the near term.

Mindy Berman, Senior Managing Director, JLL Capital Markets, tells GlobeSt.com that real estate investment managers and their capital partners have been drawn to alternative property classes such as healthcare to complement their investment holdings.

“Medical office buildings offer stable occupancy—national occupancy has not varied from 91% to 92% for 20 years—and durable income—consistent rental rates with modest annual growth,” Berman said.

“The pandemic period, once again, bore testimony to the steady performance qualities of outpatient medical buildings, while some property classes experienced higher vacancy, lower rental rates and rent collection issues.”

Christian Vaughan, vice president with Northmarq, tells GlobeSt.com, that rising interest rates have made it more difficult for private investors to get as aggressive on pricing, allowing institutional buyers to compete and win more opportunities.

Capable and aggressive groups such as Vanbarton Healthcare Group and Tramview Capital Management will continue to win opportunities in the coming months and as such, have their eyes set on achieving a large quantity of healthcare real estate product, Vaughan said.

“In the months to follow, we expect to see an influx of activity from institutional investors who are eager to deploy capital,” Vaughan said.

Population, Size Driving Cypress West Partners

Chris Cumella, co-founding partner, Cypress West Partners, tells GlobeSt.com that the top MSA’s will always garner the most attention because of population size and growth.

“An asset’s physical relation to a hospital campus in a top MSA checks everyone’s box,” Cumella said.

“However, as more services get pushed out of the acute campus setting, then more asset types will gain favor and attention from investors.”

He said that Cypress West Partners has always been focused more on top systems and top doctors than just pure MSA plays.

“Healthcare real estate has benefited from a lack of speculative development and therefore more landlord friendly metrics in general,” Cumella said. “Coupled with high replacement and repositioning costs today we expect that advantage to continue.”

The venture’s first closing consists of two medical office buildings totaling approximately 19,000 square feet in Port Charlotte and Venice, Florida which are fully leased to one of the largest providers of eye care services in Southwest Florida.

Florida Markets Fit Ideal Demographics

Vanbarton’s acquisition included the flagship location for Community Eye Centers located adjacent to two major acute care hospitals with over 500 beds in Port Charlotte, Fla., and a second location in Venice, Fla.

Both feature an above-average population growth and a disproportionately high over 65 population.

Vanbarton Healthcare Group principal Steve Leathers said in prepared remarks, “These closings are indicative of Vanbarton Healthcare Group’s strategy of identifying overlooked pockets of value in an increasingly popular healthcare investment arena. Both properties offer steady cash flow with minimal landlord obligations coupled with attractive annual rental increases.”