Unlocking Value in Healthcare Real Estate Portfolios
H2C CLIENT TRANSACTIONS
H2C capped off more than $700 million in healthcare real estate transaction volume in 2020.
Philip J. Camp
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Matthew T. Tarpley
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1. Combined value of transactions executed by H2C Securities Inc and Hammond Hanlon.
2. Conducted by Hammond Hanlon Camp LLC.
3. Conducted by Hammond Hanlon Camp LLC.
4. Conducted by Hammond Hanlon Camp LLC.
5. Conducted by Hammond Hanlon Camp LLC.
6. “How did the Tax Cuts and Jobs Act change business taxes?” The Tax Policy Center Briefing Book, Urban Institute and Brookings
7. Conducted by H2C Securities Inc.
8. Conducted by Hammond Hanlon Camp LLC.
Trend No. 1: Capitalizing on low supply of medical office buildings (“MOBs”)
Trend No. 2: Unlocking value from healthcare real estate portfolios.
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.
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.
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.
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.
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 .
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.
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.
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
Trend No. 3: Forming tax-advantaged investment vehicles
About H2C and H2C Securities Inc
H2C is a strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.
Securities offered through H2C Securities Inc., member FINRA/SIPC, a registered broker-dealer and a wholly owned subsidiary or ©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.
For more information, visit h2c.com.
About H2C Real Estate Practice
For more than 20 years, the real estate professionals at H2C and H2C Securities Inc. have successfully served as advisors on real estate transactions in excess of $14 billion nationwide. For more information on our real estate advisory group, please contact one of the following H2C professionals, or visit our website at h2c.com.
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