H2C  capped off more than $700 million in healthcare real estate transaction volume in 2020. Key trends that drove H2C’s activity in this space included the following.  

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The MOB sector continues to show remarkable resilience in pricing, an H2C analysis shows, indicating a sustained level of market interest in the MOB space, particularly from private and institutional investors. As COVID-19 created uncertainty in other real estate asset classes, such as retail and hospitality, we’ve seen investor interest in MOBs rise. This asset class benefits from significant long-term tailwinds, such as an aging population and increased healthcare spending.

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In June 2020, H2C served as the exclusive advisor to Tower Health   in monetizing a 23-asset MOB and healthcare real estate portfolio. The portfolio, located in Southeast Pennsylvania, totals 651,677 square feet and transacted for $203.7 million. The structure of this transaction enabled Tower to retain strategic control over key assets in its healthcare real estate portfolio while obtaining optimal sale terms.

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In Q3 2020, a health system advised by H2C acquired a 164,309-square-foot MOB in a Midwest suburb for $54 million . Prior to the transaction, the health system leased the facility from a privately held investor after selling in 2012 for $47 million. By acquiring MOBs in which health systems lease the majority of space and/or look to expand, these systems can realize savings by avoiding paying rent and real estate taxes, in some instances.

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In the inpatient rehabilitation, seniors housing, and senior care subsectors, H2C built upon its reputation as an experienced healthcare real estate investment banking group able to execute across the continuum of care for developers and investors.

Notable transactions include the following:
 

• In December 2020, H2C advised Hicks Ventures on the sale of three inpatient rehabilitation facilities  (“IRFs”) to Medical Properties Trust for $87 million. These newly built IRFs are split across three unique markets: El Paso, Texas, Fargo, N.D., and Clarksville, Ind.
   

• Also in December, H2C served as the exclusive advisor to Yuma Regional Medical Center  on the monetization of an 11-property healthcare real estate and administrative office portfolio located throughout greater Yuma, Ariz. The portfolio monetization coincides with the system’s ongoing strategy of extracting cash tied up in real estate and reinvesting dollars in the system’s core area of business​ .
   

 

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With the passage of the Tax Cuts & Jobs Act of 2017 , the ability to defer taxes on personal property through a like-kind exchange was eliminated, which has had a meaningful effect on private investors in seniors housing and care assets.
 

• As the long-term owner of a portfolio of skilled nursing and assisted living facilities located throughout Iowa, American Healthcare Investment, LLC (“AHI”) faced a substantial capital gains tax due to value appreciation and depreciation recapture. In September 2020, H2C served as the exclusive financial advisor to AHI  in forming a joint venture with Cascade Capital Group to launch the Healthcare Properties Exchange Fund to acquire seniors housing and care assets. This tax-advantaged investment vehicle was seeded in accordance with IRS Section 721 like-kind exchange, whereby both parties contributed assets to a limited partnership in exchange for shares or units in the fund. The Section 721 structure allows AHI and future investors to defer tax burdens and benefit from both the continued upside of the portfolio and growth of the fund.
   

• In September 2020, H2C served as the exclusive financial advisor to a privately held joint venture  that is developing a 48-bed, 51,580-square-foot inpatient rehabilitation facility in Phoenix, Ariz., to be known as “Reunion Rehabilitation Hospital Phoenix.” The Project will be developed by Dallas-based America Development & Investments, Ltd (“ADI”), a leading healthcare real estate developer. Upon completion, which is scheduled for Q3 2021, the hospital will be managed by Nobis Rehabilitation Partners, LLC. Notably, the Project is located in a Qualified Opportunity Zone, offering the ability for investors to defer or fully mitigate their capital gains taxes should they decide to maintain their investment in the Project for over five years.

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A Trusted Advisor to Providers, Property Owners, and Developers

H2C’s healthcare real estate advisory team has completed more than $14 billion in transactions over the past two decades for more than 150 clients. Because of H2C’s unique background and experience, we’re well-positioned to help organizations like yours navigate a changing healthcare landscape. 

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Footnote:

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Securities offered through H2C Securities Inc., member FINRA/SIPC a registered broker-dealer and a wholly owned subsidiary of ©Hammond Hanlon Camp LLC. All rights reserved. Hammond Hanlon Camp LLC is a wholly owned subsidiary of Fifth Third Acquisition Holdings, LLC and an indirect subsidiary of Fifth Third Bank, National Association. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit

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