Welltower Wraps $400M MOB Deal

Harrison Memorial Hospital

Health-care real estate investment firm Hammes Partners has closed on the disposition of the Hammes Medical Office Portfolio, a national collection of 23 medical office properties. With the assistance of JLL Capital Markets’ healthcare practice, the firm sold 979,000 square feet to health-care REIT Welltower Inc. for approximately $400 million.

“Medical office continues to be a hot sector for investors and is attracting new entrants, as well as increased allocation from core fund investors,” Mindy Berman, managing director with JLL Capital Markets’ health-care practice, told Commercial Property Executive.

The Class A group of medical office buildings spans across 12 metropolitan markets in nine states: Alabama, Illinois, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia and Washington. CHI St. Luke’s Health – The Vintage Hospital in Houston and Elmhurst Memorial Addison Health Center in suburban Chicago are among the list of assets. Moreover, one of the properties allows for 150,000 square feet of additional development. 

According to JLL, investors who took interest in the 94 percent occupied MOB portfolio were drawn by its high-quality and premier locations, as well as its affiliation with leading health systems, including CHI Health, Providence St. Joseph Health and UNC Health Care.

Health-care real estate checkup

The Hammes transaction is one of a bevy of recent health-care portfolio trades over the last few months. “The value proposition of medical office is particularly inviting at this point in the cycle as a defensive play with limited risk on a relative basis given high quality tenancy with stable occupancy, long duration leases and durable income with contractual rent growth,” Berman said.  

Deals announced in January 2019 alone include Broadstone Net Lease’s acquisition of the 18-building Elliott Bay National Medical Office Portfolio from Elliott Bay Capital Trust, which was represented by JLL in the transaction. And Welltower announced a definitive agreement to purchase a 55-property group of MOBs and outpatient facilities from CNL Healthcare Properties for approximately $1.3 billion.

“With superior price levels for medical office buildings in today’s markets, quality portfolios continue to come to market from longstanding dedicated medical office developers, institutional investors and others,” Berman added. “We expect 2019 to be another banner year.”

Image courtesy of Hammes Partners