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Q4 MOB Report

Portfolio Sales Drive $12.6B Transaction Year and Record-Low Cap Rates for Medical Office

January 2022


Medical office building (“MOB”) sales volume topped $12.6 billion in 2021, eclipsing the prior year’s annual volume and resulting in a record-low average cap rate for MOBs, an analysis by H2C Securities Inc. (“H2C”) shows (1). The transaction volume was primarily driven by an increase in large-portfolio transactions, 13 of which were over $75 million in total value and consisted of more than six properties for 2021.

The portfolio transactions and increased investor appetite for healthcare real estate drove average cap rates to an all-time low of 6.2 percent. Average cap rates for MOBs have dropped 40 basis points since 2019 and are supported by quicker compression in the sub- healthcare asset classes, such as inpatient rehabilitation (“IRF”) and behavioral health facilities (“BH”), where cap rates have decreased by 60 basis points on average since 2019 (2). As cited in previous H2C quarterly MOB reports, as the investor pool for traditional MOBs has increased and cap rates have compressed, investors have looked to these healthcare subclass assets as a quality investment to achieve better yields. Indicatively, the average IRF cap rate is 70 basis points higher than MOB, and the average BH cap rate is 120 basis points higher (3). It is reasonable to believe that the spread between cap rates in IRF and BH compress toward average MOB cap rates into 2022 given this dynamic.

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Source: Based on an H2C analysis of industry data from RCAnalytics.

Portfolio realizations were made by primarily healthcare real estate-focused private investors in 2021, an H2C analysis shows. Many of these were in the form of recapitalizations to position the investors for future growth and align with new equity sources, including Indianapolis- based Cornerstone Companies, Rendina Companies, Catalyst HRE, and Montecito Medical. Other notable portfolio transactions that capitalized on record-low MOB cap rates and accounted for meaningful transaction volume included Landmark Healthcare Facilities’ $750 million portfolio sale to Physicians Realty Trust (NYSE:DOC), IRA Capital’s $670 million, 29-property portfolio sale to a joint venture between NexCore and Nuveen, Harrison Street’s 14-property portfolio sale to Healthpeak Properties (NYSE: PEAK), Ryan Companies’ 11- property portfolio sale and Albany Road Real Estate Partners’ monetization to Evergreen Medical Properties, in partnership with Bain Capital.

Fig 5.png

Source: Based on an H2C analysis of industry data from RCAnalytics.

Despite increased portfolio transaction volume, a strong market still exists to capitalize on the robust market for MOBs in early 2022. The headwind that could prevent further cap rate compression would be a rising- interest rate environment; however, demand still outpaces supply for quality MOBs.

Investment Sales and Trends

The largest portfolio transaction in the fourth quarter was completed by Milwaukee-based Physicians Realty Trust Inc. (NYSE: DOC), which acquired a portfolio of 15 MOBs with about 1.46 million square feet of space. The price final price of $764.3 million equates to about $523 per square foot at a 4.9 percent cap rate. With a total occupancy of about 95 percent and a remaining weighted average lease term (WALT) of 7.4 years, the portfolio's tenancy is 74 percent occupied by investment grade health systems or their subsidiaries. The deal establishes 10 new health system relationships for DOC in 11 markets, including the University of Florida Health (Aa1/AA/NR), Beaumont Health (A1/NR/A+), Hackensack Meridian Health (Aa1/AA-/AA-), Baptist Health Systems (NR/A+/NR), McLaren Health Care (A1/AA-/NR), and Allegheny Health (NR/B+/NR). Landmark Healthcare Facilities developed all of the MOBs in the offering except for one of them.

The largest portfolio transaction in the third quarter was completed by Nuveen and NexCore Group, which acquired a 29-property MOB portfolio totaling 1,132,235 square feet across 13 states for $620.4 million, or $532 per square foot. The acquisition includes $463 million of medical office buildings and $157 million in life sciences facilities, occupied by leading health systems, physician practices, research institutions and life sciences companies. The seller was Los Angeles-based IRA Capital, which acquired a majority of the properties sold from 2019 through early 2021.

Regional Review (4)

The Southeast region had the greatest transaction volume compared with other RCA- tracked regions, at $941.9 million. Of this volume, $343.1 million was attributed to the aforementioned Physicians Realty Trust’s purchase of the Landmark Healthcare MOB Portfolio, of which six of the 15 properties were located in the Southeast. Notably, Q4 saw cap rates across all regions decrease, with the largest fluctuation occurring in the Southeast and the West, decreasing by an average of 17 percent. The West region recorded both the lowest cap rate and highest per square foot metrics at the end of 2021 at 4.9 percent and $512 per square feet.

Northeast Region

In October, a joint venture between Evergreen Medical Properties and Bain Capital acquired the I-95 Portfolio, which consists of 12 assets totaling 573,554 square feet. The name is in reference to the portfolio’s heavy concentrationof square footage along or near U.S. Interstate 95 in Greater Providence, R.I. Although portfolios are in great demand by large investors because of the scale they offer, the I-95 portfolio was also attractive because of its tenant roster, which includes two major health systems with investment-grade credit ratings. Those systems are Providence-based Lifespan (NR/BBB+/NR), which operates five hospitals and numerous outpatient, rehabilitation, behavioral, and other types of locations, and New Bedford, Mass.-based Southcoast Health (Baa1/A-/NR), which operates three hospitals and nearly 60 locations in southern Massachusetts and Rhode Island. The $158 million purchase price equated to $275 per square foot.

In November, Ausherman Properties sold Aspen Ridge medical buildings 1 through 3 in Frederick, Md., for approximately $34.9 million, or $380 per square foot, to BentallGreenOak. Located at 161, 163, and 165 Thomas Johnson Drive, within “Doctors Row,” the buildings range in size from 21,264 square feet to 47,727 square feet. Aspen Ridge consists of two one-story MOBs, completed in 2014 and 2015, and a two-story MOB built in 2017. At the time of the sale, the trio of properties was 92 percent leased to a roster of 16 tenants, including Johns Hopkins, Frederick Health (Aa2/AA-/AA), MedStar (A2/BBB+/A), Quest (Baa2/BBB/NR), LabCorp (Baa2/NR/BBB), and Fresenius (Baa3/BBB-/BBB).

Meanwhile, Albany-based Columbia Development recently sold a 67,896-square-foot MOB and surgery center in its hometown for $12.1 million, or $178 per square foot. Albany Medical Center (Aaa/NR/NR), the parent organization of the 766- bed Albany Medical Center Hospital and Albany Medical College, acquired the facility at 50 New Scotland Ave., located on the hospital campus. Columbia developed the building, which includes ground retail space, in 2011 as part of a series of new facilities adjacent to the hospital.

In September, Hammes Healthcare started construction on a four-story outpatient clinical tower on the site of a former Sears store at Marketplace Mall in Henrietta, a suburb of Rochester. The future tower will be flanked by an ambulatory surgery center (ASC), for which construction began in 2020. The two facilities will have a total of more than 400,000 square feet, occupied by the University of Rochester (UR) (Aa3/AA-/AA-) Medicine Center for Orthopaedics and Physical Performance. Upon opening the facility will provide clinical care, research, education, and community wellness supported by eight operating rooms, with additional pre- and post-operative rooms to support the most complex orthopedic surgical procedures.

Mid-Atlantic Region

In December, Anchor Health Properties (Anchor) recently acquired two Class A MOBs in high-growth submarkets of Nashville, Tenn. Totaling approximately 90,000 square feet, the assets were acquired through a joint venture with Harrison Street. The investment in these two MOBs effectively grows the Anchor’s portfolio in the Nashville MSA to six assets totaling nearly 250,000 square feet and 18 assets totaling 734,000 square feet across the state of Tennessee. The properties are anchored by major national and regional healthcare providers, including Williamson Medical Center (Aaa/AAA/NR) and Snodgrass- King Dental, a major regional dental practice owned by North American Dental Group. The $27.3 million purchase price equated to $308 per square foot.

Fig 3.png

Source: Based on an H2C analysis of industry data from RCAnalytics.

Meanwhile, Anchor Health also acquired a 187,078-square-foot medical office campus in West Chester, 35 miles west of Philadelphia. The Fern Hill Road Medical Campus at 915 Old Fern Hill Road is affiliated with the 309-bed Chester County Hospital, which is less than a mile away and part of Philadelphia-based Penn Medicine. The multi-tenant campus, which includes a surgery center, is 100 percent leased, with tenants offering cardiology, gastrointestinal, primary care, and other services. The purchase price of approximately $33.1 million equated to $138 per square foot.

West Region

In October, Denver-based Healthpeak Properties Inc. (NYSE: PEAK) finalized a sale- leaseback transaction with Northwest Kidney Centers to acquire their 39,115 square foot MOB in Seattle, Washington. Healthpeak Properties Inc. has invested more than $1.5 billion in healthcare facilities over the past year including hospitals and MOBs. The five-story MOB and adjoining 85-space parking garage at 700 Broadway are connected via a pedestrian tunnel to the 661-bed Swedish Medical Center First Hill campus. The $42.5 million purchase price equated to $1,087 per square foot.

Also, in November, Healthpeak Properties, Inc. (NYSE: PEAK) broke ground on the initial phase of its Vantage campus in South San Francisco following strong leasing activity and demand at The Shore at Sierra Point and Nexus on Grand. Located on the corner of Forbes Boulevard and Allerton Avenue in the heart of South San Francisco, the initial phase of Vantage will consist of two purpose-built life science buildings totaling approximately 343,000 square feet, in addition to a high-end, 30,000-square- foot amenity center complemented with ample outdoor meeting and community space. The project is anticipated to be completed in the second half of 2023.

In November, Denver-based NexCore LLC announced that its joint venture partnership with Los Angeles-based HATCHspaces is moving forward with its third life science development. The JV has plans for a 100,000-square-foot facility at West Pico and Sepulveda boulevards in Los Angeles, California. Overall vacancy rates for life science space are hovering around 1.5% in the LA market, and the area is in desperate need for this specific use. The project sits atop one of the most iconic intersections in the LA region and is adjacent to the Expo/Sepulveda Station of the Expo Line transit corridor. The venture capital community has increased life science investment in the LA region by over 60 percent since 2018, ranking fifth in the country for life science investment.

Southwest Region

In November, Colo.-based American Medical REIT Inc. (AMRE) acquired three long-term acute care hospitals (LTACHs) in Wilkinsburg, PA. and in Fort Worth and Plano, Texas, for a total of $52 million, or $200 per square foot. The LTACHs have a total of 195 beds and are anchored by Addison, Texas- based LifeCare Hospitals. 

Meanwhile, Physicians Realty Trust Inc. (NYSE: DOC) has acquired the newly opened, 109,423-square-foot HonorHealth Neuroscience Institute on the campus of the system’s 325-bed Scottsdale Osborn Medical Center. The five- story facility provides a multidisciplinary approach to spine and neurological care under one roof. The facility price was $67.3 million, or $615 per square foot, at a cap rate of 4.5 percent.

In December, a 204,123-square- foot MOB traded in Las Vegas, Nev., for $67 million, or $328 per square foot. Rancho Sante Fe, Calif.-based Premier Realty Holdings acquired the six-story building located at 2716 North Tenaya Way and fully leased to Sierra Health & Life, part of Minnetonka, Minn.-based UnitedHealth Group (NYSE: UHG) (A3/A/A+), for its regional office headquarters. The tenant, one of Nevada’s largest employers, has occupied the building since it was constructed in 1998. The facility houses the tenant’s administrative and operations functions for their data and health intelligence business.

Midwest Region

In October, New York-based Healthcare Trust Inc., a non- traded real estate investment trust (REIT), recently acquired the 77,367 square foot Belpre Cancer Center in Belpre, Ohio. The state- of-the-art facility was completed earlier this year and fully leased by the adjacent Marietta Memorial Hospital Belpre. Relocating cancer services to this new facility will help Marietta Memorial expand services, offer new treatment options, and make it more convenient for patients who currently might have to travel between the Belpre and Marietta campuses. The property sold for a price of $79.9 million, or $1,033 per square foot.

In November, Altera Development acquired a two- MOB, 285,463-square-foot portfolio in Colorado Springs for $56.6 million, or $198 per square foot. The 72 percent occupied portfolio comprises the 59,887- square-foot Briargate Medical Campus and the 226,448- square-foot Printer's Park Medical Plaza. The off-campus buildings were 95 percent leased, 20 percent of which were leased by major health care providers, including HCA HealthOne (NR/NR/NR), UCHealth (Aa3/AA/NR) and DaVita (Ba2/BB-/BB).

In December, H2C advised ProHealth Care, Inc., a Wisconsin-based not-for-profit health system, in connection with its acquisition of three MOBs and the restructuring of a long-term lease for four assets throughout its primary market area. The three properties, acquired from a third-party owner, represent long-term strategic assets for the System.

By owning these properties, the System is able to grow its footprint within space it would have had to lease, consolidate practices into strategic locations, and realize savings through rent and potentially real estate taxes. The restructuring of the lease for the remainder of the properties provides the System with fixed rent increases it can budget for and greater flexibility to continue its tenancy. H2C is finding that more and more health systems have taken a proactive approach in optimizing their leased and owned real estate portfolios. The buy-back price of approximately $47 million equated to $448 per square foot.

Meanwhile, Harrison Street ended the year with the acquisition of 11 medical office assets totaling 500,778 square feet across six states: Florida, Illinois, Minnesota, North Carolina, North Dakota, and Wisconsin. The mix of buildings includes single- and multi-tenant medical office, ambulatory surgery centers, and a multi-use integrated service center. Ryan Companies, the seller, will continue managing these buildings under the new ownership. The purchase price of approximately $215 million equated to $429 per square foot.

Midwest Region

In October, Easterly Government Properties Inc. (NYSE: DEA) indicated that it has formed a joint venture to acquire a 1,214,165-square-foot portfolio of 10 properties that are 100 percent leased to the U.S. Department of Veterans Affairs (VA) for a purchase price of about $635.6 million, or $523 per square foot. The acquisitions will close “on a rolling basis” by the end of 2023, including three properties in Texas, two in Georgia, and one each in Tennessee, Kansas, Alabama, Arizona, and Florida. The 100 percent build-to-suit, Class A properties are either recently delivered or under construction, and the average lease term is 19.6 years.

Also, Woodside Health sold Boynton Beach Medical Plaza, located at 10151 Enterprise Center Boulevard, and West Boynton Medical at 7593 West Boynton Beach Boulevard for approximately $38.1 million, or $380 per square foot. The two MOBs are across the street from each other in Boynton Beach, Florida, and both properties are Class A, two-story buildings with a total of 101,000 square feet.


  1. Based on H2C analysis of industry data from RCAnalytics.

  2. Based on H2C analysis of industry data.

  3. Based on H2c analysis of industry data.

  4. All regional data based on H2C analysis of Industry data from RCAnalytics.

About H2C Securities Inc. ("H2C")

H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations, higher education institutions, andrelated companies throughout the United States. H2C’s professionals have a long track record of success in healthcare and higher education mergers and acquisitions, capital markets, and real estate transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.

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