January 23, 2020
John B. Mugford

Big Welltower MOB Portfolio Purchase Closes Out 2019

As 2019 was winding down, a large MOB portfolio sale closed with just five days left in the year. That sale, perhaps, could be a key toward propelling 2019’s total MOB sales volume to once again top $10 billion for the fifth straight year.

As 2019 was winding down, a large MOB portfolio sale closed with just five days left in the year. That sale, perhaps, could be a key toward propelling 2019’s total MOB sales volume to once again top $10 billion for the fifth straight year.

On Dec. 26., Welltower Inc. (NYSE: WELL) closed on a $787 million acquisition of 29 MOBs from Milwaukee-based Hammes Partners, the investment affiliate of longtime healthcare development firm the Hammes Company.

Welltower reports that the portfolio 1.5 million square feet, a 97 percent “economic occupancy,” a weighted average lease term (WALT) of 12 years and 2.2 percent average annual rent escalators.

As of earlier this week, Revista’s MOB sales data included information on 22 of the 29 properties in the portfolio, as the firm’s researchers were still tracking down information on the remaining seven facilities involved in the overall transaction. The 22 properties recorded so far sold for a total of about $519 million, meaning the remaining seven properties were likely to have an aggregate price of about $268 million.

However, an officer with Hammes reports that the deal certainly did close in 2019 for $787 million.

As of the writing of this article, Revista had yet to compile the total MOB sales volume for the past year, and any attempt to do so would be premature with sales reports still coming in.

However, at the end of Q3, year-to-date MOB sales totaled $7.1 billion, with several industry professionals saying that a number of pending deals at the time would most assuredly bring the volume to $10 billion or more.

A few of those pending deals involved Welltower, which had made MOB purchases totaling $2 billion as of the end of Q3 and then, in November, announced additional agreements, including the one with Hammes, to make acquisitions totaling $1.67 billion. While those deals were expected to close by the end of 2019, it is not yet clear if they did.

If those deals indeed closed by the end of 2019, Welltower’s MOB purchases for the year were likely to have topped $3.5 billion. Its purchases during the year include the second largest arm’s length transaction in MOB sector history, its $1.25 billion purchase of 55 MOBs from CNL Healthcare Properties.

As for the Welltower-Hammes transaction, a number of properties in the portfolio deal sold for more than $30 million, according to Revista data.

One of those is the Grace Clinic at 4515 Marsha Sharp Freeway in Lubbock, Texas. The 106,894 square foot MOB sold for $58.8 million ($550 PSF) and is anchored by Grace Clinic Lubbock, part of locally based Grace Health System and its parent organization, which serves west Texas and eastern New Mexico.

Another higher-priced MOB in the portfolio is Portico West, an 85,483 square foot MOB at 3277 E. Louise Drive in Meridian, Idaho. The price was $44.7 million ($523 PSF) for the MOB affiliated with Boise, Idaho-based St. Luke’s Health System.

Also in the portfolio is Riverside Wharf at 1420 Key Highway in Baltimore. The 68,150 MOB had a price tag of $34.9 million ($512 PSF) and is anchored by MedStar Urgent Care, National Rehabilitation Hospital and Psychmed Service.

As of the writing of this article, Revista had yet to compile the total volume for the past year, and any attempt to do so would be premature with sales reports still coming in.

However, at the end of Q3, year-to-date MOB sales totaled $7.1 billion, with a number of industry professionals saying that a number of pending deals at the time would most assuredly bring the volume to $10 billion or more.

A few of those pending deals involved Welltower, which had made MOB purchases totaling $2 billion as of the end of Q3 and that had, in November, announced additional agreements, including the one with Hammes, to make acquisitions totaling $1.67 billion. While those deals were expected to close by the end of 2019, it is not yet clear if they did.

If those deals include closed by the end of 2019, Welltower’s MOB purchases for the year were likely to have topped $3.5 billion. Its purchases during the year include the second largest arm’s length transaction in MOB sector history, its $1.25 billion purchase of 55 MOBs from CNL Healthcare Properties.

The Hammes deal certainly did close in 2019, as confirmed by an officer with Hammes Partners.

As of earlier this week, Revista’s MOB sales data included information on 22 of the 29 properties in the portfolio, as the firm’s researchers were still tracking down information on the remaining seven facilities involved in the overall transaction. The 22 properties recorded so far sold for a total of about $519 million, meaning the remaining seven properties were likely to have an aggregate price of about $268 million.

Among the MOBs that are included in Revista’s sales data concerning the Welltower-Hammes deal are several properties selling for more than $30 million.

One of those is the Grace Clinic at 4515 Marsha Sharp Freeway in Lubbock, Texas. The 106,894 square foot MOB sold for $58.8 million ($550 PSF) and is anchored by Grace Clinic Lubbock, part of locally based Grace Health System and its parent organization, which serves west Texas and eastern New Mexico.

Another higher-priced MOB in the portfolio is Portico West, an 85,483 square foot MOB at 3277 E. Louise Drive in Meridian, Idaho. The price was $447.7 million ($523 PSF) for the MOB affiliated with Boise, Idaho-based St. Luke’s Health System.

Also in the portfolio is Riverside Wharf at 1420 Key Highway in Baltimore. The 68,150 MOB had a price tag of $34.9 million ($512 PSF) and is anchored by MedStar Urgent Care, National Rehabilitation Hospital and Psychmed Service.

Welltower reports that the portfolio from Hammes has 1.5 million square feet and a 97 percent “economic occupancy,” a weighted average lease term (WALT) of 12 years and 2.2 percent average annual rent escalators.

John B. Mugford
Editor
Healthcare Real Estate Insights