Florida Medical Office Building With Surgery Center Sells For $25.7M — 3 Insights

Real estate investment trust Welltower purchased Jacksonville, Fla.-based CenterOne Surgery Center’s medical office building for $25.7 million from CNL Healthcare Properties, the Jacksonville Daily Record reports.

What you should know:

1. The three-story medical office building is around 100,000 square feet.

2. CNL sold the medical office building to Welltower as part of a $1.25 billion property bundle.

3. CNL Healthcare Properties President and CEO Stephen Mauldin said, “The sale of our 55-building, class A medical office portfolio to Welltower represents a strong, early-value realization step for CNL Healthcare Properties.”

Source: Becker’s ASC Review

Welltower Completes Purchase Of 55 Medical Buildings From CNL Healthcare Properties

Welltower Inc. (NYSE: WELL) and CNL Healthcare Properties announced yesterday that Welltower has completed the purchase of a Class A health care facilities portfolio for $1.25 billion.

“We are extremely excited to close on this transaction and are pleased with the progress we have made to date that further enhances the value of these high-quality assets,” said Keith Konkoli, Senior Vice President and leader of Welltower’s Medical Office and Outpatient segment. “By leveraging the strength of our platform, we have made substantial progress in extending ground leases, have experienced increased leasing velocity, and have identified additional opportunities to deploy capital that helps our health system partners improve care delivery to the communities they serve, further demonstrating our unique ability to drive long-term value through meaningful collaborations with the nation’s premier health systems.”

 

“The sale of our 55 building, Class A medical office portfolio to Welltower represents a strong, early value realization step for CNL Healthcare Properties and our approximately 45,755 stockholders,” said Stephen H. Mauldin, president and CEO of CNL Healthcare Properties. “This is the first sizeable transaction in our carefully orchestrated strategic alternatives process to provide liquidity to investors, and we are very pleased with the outcome.”

 

Welltower Agrees To Purchase 55 Medical Buildings From CNL Healthcare Properties

Welltower Inc. (NYSE: WELL) and CNL Healthcare Properties announced today that they have entered into a definitive agreement under which Welltower will acquire a Class A medical office and outpatient facilities portfolio comprised of 55 buildings from CNL Healthcare Properties for $1.25 billion. The sale is expected to close during the first half of 2019, subject to customary closing conditions, governmental and other third-party consents.

Welltower will be acquiring 55 assets out of the 63 properties (medical office buildings, post-acute care facilities and specialty hospitals) initially marketed by CNL Healthcare Properties through its strategic financial advisors. The 55 properties have a current occupancy of 94 percent and average annual rent increases of 2.4 percent. The properties are strategically located and 92 percent are affiliated with some of the nation’s premier health systems including Novant, Memorial Hermann and Cleveland Clinic. With 3.3 million rentable square feet in major metropolitan markets across 16 states, the acquisition portfolio will have significant overlap and synergies with Welltower’s existing outpatient medical footprint. Welltower’s proprietary data science and analytics platform has identified this Class A portfolio to have above average market potential defined by opportunity metrics such as market prioritization rank, predictive annual gross rent, insurance/payor mix and physician net need score. At the same time, the portfolio is affiliated with strong hospitals and health systems, none of which are “at risk” hospitals based on Welltower’s proprietary hospital risk analysis.

“Through the strategic acquisition of 55 high-quality medical office buildings from CNL Healthcare Properties, we continue to accretively expand our outpatient medical and health system portfolio,” said Shankh Mitra, Welltower’s chief investment officer. “Welltower was able to act quickly and definitively when the opportunity presented itself, leveraging our proprietary data science platform and deep local presence through our real estate services platform to come to an agreement with CNL as a high quality and reputable sponsor. With market potential metrics and low risk factors, along with a healthy initial cash yield, good escalators and low capital expenditure requirements, this investment will provide an excellent total return for our shareholders.”

CNL Healthcare Properties, a public, non-listed real estate investment trust (REIT) focused on seniors housing and healthcare facilities with a highly respected and seasoned management team, is monetizing this medical office portfolio as part of its ongoing process to pursue strategic alternatives to provide liquidity for its shareholders. The company plans to use the proceeds from the sale to repay debt, pay closing costs and other related expenses. The company, with approval from its board of directors, may use proceeds to rebalance corporate borrowings to further bolster its balance sheet as it pursues additional liquidity alternatives. Post-closing, the company expects to make a special distribution to shareholders, also subject to approval of its board of directors.

CNL Healthcare Properties will continue to own and actively manage a sizeable private-pay, seniors housing centric portfolio of 87 communities located in 31 states.

“Since CNL Healthcare Properties made our first investment in early 2012, we have worked swiftly and thoughtfully to construct and nurture a leading national portfolio of seniors housing and healthcare assets,” said Stephen H. Mauldin, president and CEO of CNL Healthcare Properties. “The sale of our Class A medical office assets to Welltower underscores both the high quality of these properties and our focused work to drive investment performance and value for our investors. Welltower’s deep knowledge of the sector, the CNL platform’s positive experience in past dealings with Welltower, along with its reputation of certainty in delivering on commitments will realize significant value for our shareholders in today’s volatile capital market environment. While we are in the early phases of our strategic liquidity process for the fund, we are confident that this transaction is a strong first step to begin returning capital to our shareholders.”

In June 2018, CNL Healthcare Properties engaged the real estate investment banking groups of HFF Securities L.P. and KeyBanc Capital Markets Inc. to act as strategic financial advisors in exploring and executing potential liquidity alternatives.

Over the last 15 years, CNL Financial Group has been especially active in the seniors housing and healthcare sectors. As of Dec. 31, 2018, CNL-sponsored companies have invested in seniors housing and healthcare real estate investments valued at more than $10 billion, collectively.

Industry Sources Say CNL Healthcare Properties Plans To Sell Its MOBs

In what could be the largest medical office building (MOB) portfolio sale since last year’s Duke Realty sale, multiple healthcare real estate (HRE) industry sources tell Healthcare Real Estate Insights that CNL Financial Group plans to sell the MOB portfolio owned by its Orlando-based CNL Healthcare Properties real estate investment trust (REIT).
Sources say CNL has hired HFF and KeyBank to market the properties.
Efforts to contact executives of CNL, HFF and KeyBank have been unsuccessful. However, multiple HRE industry sources have told HREI that they have heard that a sale is in the works.
Not to be confused with CNL Healthcare Properties II, which was launched in 2016 and is still open to new investors, CNL Healthcare Properties is a non-traded REIT closed to new investors on Sept. 30, 2015.
According to a fact sheet available on its website, CNL Healthcare Properties developed and acquired properties with a total investment of about $3.02 billion from 2012 to 2015. The REIT consists of 58 percent senior housing, 31 percent MOBs, 6 percent post-acute and 5 percent acute care facilities, based on purchase price, development budget and/or capitalized cost.
Sources say that at this time CNL plans to sell only the MOBs, not the other assets. The REIT’s portfolio includes 54 MOBs totaling about 3.26 million square feet, according to the fact sheet.
The MOBs with the greatest valuation include: Midtown Medical Plaza, Charlotte, N.C., $54.7 million; Presbyterian Medical Tower, Charlotte, N.C., $36.3 million; Bend Memorial Clinic MOB, Bend, Ore., $36 million; Center One, Jacksonville, Fla.; $34.4 million; and UT Cancer Institute Building, Knoxville, Tenn., $33.7 million.
The total investment amount for the MOBs was $931.4 million, according to the fact sheet, which would almost certainly mean they would fetch more than $1 billion if sold in a competitive bidding situation.
Source: HREI

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