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Deals & Dealmakers

Heitman in biggest ever medical buy

Global real estate investment management firm Heitman has acquired a 17-building medical office portfolio known as the PHT portfolio.

The 1.4 million-square-foot portfolio was sold by Bentall Kennedy in a deal brokered by JLL Capital Markets, Healthcare team.

“The PHT Portfolio is a high-quality, well-diversified portfolio of premier properties with near-100 percent occupancy and a collective tenancy of highly-rated, market-leading health systems,” said Brian Pieracci, Heitman managing director.
“The Class-A portfolio exhibits nearly all of the qualities that we look for when acquiring core medical office properties for our portfolio.”

Bentall Kennedy assembled the portfolio over the last 12 years through new development and acquisition. The properties are new Class A medical office buildings located on the campuses of highly rated, market-leading and academic health systems in seven states. The buildings are 96 percent occupied and located in desirable U.S. markets.

“This portfolio attracted a high level of interest from a roster of well-known private and public healthcare investors, as well as many institutional core funds and foreign investors,” said Mindy Berman, managing director, JLL Capital Markets.
“An investment of this caliber is further evidence of good supply of product for new investment in healthcare. As outpatient care in the U.S. expands and investment appetite supports the growth, large-scale opportunities like this will continue.”

Sales of medical office buildings in 2017 rose to a record level of $9.5 billion, according to JLL experts, past the previous high-water mark of $9 billion in 2015, and substantially higher than the typical annual volume of $5 billion.
The PHT portfolio is one of the largest medical office asset sales to have occurred. Investors’ appetites are being fed by an industry that has been steadily migrating to lower cost outpatient settings. This is causing a spike in outpatient visits, which are expected to increase by 20 percent over the next decade, and now constitute more hospital revenue than inpatient care for the first time in history.

Annual healthcare spending is projected to grow by more than 5 percent a year, most of which is earmarked for ambulatory settings.

“Healthcare real estate is emerging from the shadows of alternative sectors and is increasingly being viewed as a staple asset,” said Jonathan Geanakos, president, JLL Capital Markets, Americas.

“Interest in medical office is at an all-time high given the robust capital available for real estate investment, especially from core investors and foreign capital seeking durable income from stable product offering attractive yields.”

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