Woodside, Heitman Recapitalize $140M MOB Portfolio

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Woodside Health has recapitalized a 10-property, 423,000-square-foot medical office building portfolio spanning four states in a deal with an affiliate of Heitman that will seed a programmatic joint venture between the firms. Crain’s Cleveland Business reported the transaction was valued at $140 million.

The agreement between Woodside Health, a Cleveland-based MOB acquisition and management company, and Heitman, a global real estate investment firm, marks Woodside’s first joint venture with an institutional partner and will enable the company to significantly expand its portfolio of health-care real estate.

Newmark’s Healthcare Capital Markets group, in cooperation with local licensees, represented Woodside in the recapitalization and procured Heitman as a joint venture partner. The team was led by Senior Managing Directors Jay Miele, John Nero and Michael Greeley and Executive Managing Director Ben Appel. Newmark Associates Adam Goss and Ron Ott provided financial analysis on the transaction.

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Miele said in a prepared statement the partnership with Heitman will support Woodside’s aggressive growth objectives by augmenting its investment criteria to include larger transactions across an expanded geographic footprint.

The seed portfolio comprises 10 properties in Texas, Arizona, Georgia and Florida. The assets total approximately 423,000 square feet and are occupied by health systems, physician networks and independent doctors. The portfolio has an occupancy rate of 94 percent and has 4.3 years of weighted average lease term remaining and 2.8 percent contractual annual escalations.

Growing portfolio

Founded in 2008, Woodside Health has been one of the most active value-add medical office buyers in the country. To date, the company has completed 47 acquisitions spanning seven states. The firm has acquired, developed and financed nearly 250 assets at more than $4.5 billion in gross value.

Woodside is led by Principals Ted Barr, Joe Greulich, Ben Sheridan and Ben Barr, who have a total of 85 years of experience in the industry. Ted Barr, a founding principal who leads acquisition efforts for the firm, said the two firms have a shared investment philosophy, cultures and growth objectives. He said they were important criteria for the decision to partner with Heitman in a joint venture to acquire portfolios and individual assets as they bolster their presence in key markets and expand into new ones.

Brian Pieracci, managing director of acquisitions – North America at Heitman, said in prepared remarks the seed portfolio’s granular rent roll provides stable current cash flow with the ability to mark rents to market in an inflationary environment. He also noted the joint venture creates the opportunity to aggregate a portfolio of assets in high-growth markets with strong health-care fundamentals.

Woodside deals

The firms did not disclose which properties in Woodside’s portfolio seeded the new joint venture with Heitman. Woodside was active late last year with two acquisitions in November. The firm purchased Blake Park, a six-building medical and office property totaling 55,517 square feet in Bradenton, Fla. The property was 80 percent leased to 17 tenants, including 13 medical tenants. It was the first acquisition for Woodside in the Tampa/Sarasota market and the fourth on the Florida Gulf Coast.

Earlier in the month, Woodside acquired Pearland Central Medical Plaza, a three-building medical and professional office property totaling 41,700 square feet in Pearland, Texas. The property has 13 tenants and is 89 percent leased. It was the seventh in the Houston market for Woodside. The firm made another purchase in Texas in September, buying Colleyville Square in the Dallas-Fort Worth MSA. The property in Colleyville, Texas, totals 25,000 square feet and is 70 percent leased with

seven tenants. It was the third acquisition in the market since Woodside returned to the Dallas area last year.

In June, Woodside acquired Optum Center, an 81,9070-square-foot medical office building in Phoenix for $20 million from Talia Jevan Properties Inc. The five-story building was 94 percent leased with United Healthcare as the main tenant. Also in June, Woodside purchased Arrowhead Executive Center, an eight-building, 98,958-square-foot office property in Glendale, Ariz., for $18.2 million. It was Woodside’s fourth acquisition in Glendale in the last five years and seventh in the Phoenix area.