Capital partnerships were a hot topic at the BOMA International Medical Office Buildings + Healthcare Real Estate Conference, where leaders for Hammond Hanlon Camp LLC (“H2C”) led two panel discussions and spoke with experts from across the industry.
During the conference, held May 1-3, 2019, in Minneapolis, John Nero, Director, H2C, moderated the panel “Investor Strategies: Aligning with Capital Providers." Meanwhile, Jay Miele, Managing Director, H2C, led a discussion around the new lease accounting standard for health care in “Is This Going to Hurt? An In-Depth Look at the New Accounting Standard for Leases.”
Nero and Miele point to five key takeaways from the BOMA conference.
BOMA Takeaway No. 1
The healthcare real estate industry continues to see an influx of capital providers seeking entry into the sector. These include private equity firms, institutional capital, and foreign investors. Each of these groups was represented at the conference.
BOMA Takeaway No. 2
Key drivers for capital providers entering MOB investing include the aging population and attractive risk-adjusted returns. The counter-cyclical nature of this asset class makes it particularly appealing now, given many investors believe we may have seen the top of the last market cycle.
BOMA Takeaway No. 3
The key to a successful MOB investment strategy is achieving scale. Capital providers seek to align with operators that can achieve scale, while for operators, alignment on scale expectations is critical.
BOMA Takeaway No. 4
MOB operators aren’t seeing a shortage of capital—but they want to align with strategic capital partners that give them a competitive advantage. Factors they look for in selecting a capital partner include speed, flexibility, surety of execution, discretionary investment, competitive economics, and sourcing advantages, among others.
BOMA Takeaway No. 5
Carefully review financial covenants in existing borrowing agreements now to determine the potential impact of healthcare’s new lease accounting standard. A new lease accounting standard that takes effect in fiscal years beginning after Dec. 15, 2019, could significantly affect healthcare organizations’ financial covenant calculations under their borrowing agreements. It could also impact the structure of future borrowing agreements as well as an organization’s choice of financing product. Leaders should review existing borrowing agreements with an eye toward:
The definition of indebtedness
Covenant calculation requirements
Their organization’s ability to continue covenant calculations under GAAP before the lease accounting change takes effect
Healthcare leaders should talk with lenders regarding their interpretation of the lease accounting guidance. Additionally, health systems contemplating real estate transactions should evaluate any impacts to their financial statements that may result from the new standard. Find out more.
Care to continue the conversation? We’d love to talk with you. Contact an H2C professional directly.
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ABOUT HAMMOND HANLON CAMP LLC
Hammond Hanlon Camp LLC (“H2C”) is an independent 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. Hammond Hanlon Camp LLC offers securities through its wholly-owned subsidiary H2C Securities Inc., member FINRA/SIPC. For more information, visit h2c.com.
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5 Takeaways from BOMA MOB Conference
posted on May 31, 2019
H2C INDUSTRY INSIGHTS • BOMA RECAP • MAY 2019
The key to a successful MOB investment strategy is achieving scale.