August 14, 2014
Mike Hargrave

Dissecting the Recent LaSalle/HCT Deal…

Many veteran investors in medical office properties are familiar with LaSalle Investment Management. LaSalle, by many accounts, was the first institutional private equity investor to raise a fund focused on medical office properties. Steve Bolen joined LaSalle in 2000 to launch the MOB practice.  They have ultimately invested in over 80 medical office buildings in a couple of dedicated medical office funds as well as some separate accounts and the firm’s core open end fund.  All totaled, LaSalle has invested in about $1.3 billion of MOBs.  LaSalle has recently sold some of it’s assets in MOB Fund II. This fund has closed on 2 separate groups and American Realty Capital’s Healthcare REIT II (NYSE: HCT) has been the buyer.   This post will examine the second portfolio, most of which has been closed by ARC.

The 2nd portfolio involved 13 MOBs and 534,000 square feet in 5 states. The total aggregate price of this part of the deal was $136 million which works out to $256 per square foot. Per an 8K filed, the cap rate on the deal works out to 6.14%. The portfolio was 92% leased at the end of 2013 and Trinity Health of Michigan was the largest tenant, comprising 11% of the portfolio’s rental income.  As part of the deal, HCT paid $343 per foot for the Bowie Gateway Medical Building in Bowie MD.  The anchor tenant in this class A 36,000 square foot building is Anne Arundel Health System.

Here are the properties involved in the deal – click on the property name to see the respective Revista Property View Report.  The properties without a link are not yet in our coverage area.

Name State Square Feet Purchase Price PPsqft Confidence Affiliated? On Campus? Building Class
Arrowhead AZ 45,289 $11,170,000 $247 Confirmed Yes Yes A
310 Lafayette MI 59,845 $18,012,478 $301 Allocated Yes Yes A
Bowie – AAHS MD 36,260 $12,450,000 $343 Confirmed Yes No A
Stockbridge Family Medical GA 19,822 $3,120,000 $157 Confirmed No No B
Village Center – Stockbridge GA 25,051 $4,100,000 $164 Confirmed Yes No B
Creekside GA 54,899 $10,030,000 $183 Confirmed Yes Yes A
Benedictine/Health Alliance St. Mary’s NY 35,461 $10,673,247 $301 Allocated Yes Yes B
New Paltz NY 50,000 $15,049,275 $301 Allocated Yes No A
New Windsor NY 48,448 $11,590,000 $239 Confirmed Yes No A
Plank   Rd NY 25,308 $4,530,000 $179 Confirmed Yes No B
Cushing NY 43,308 $13,200,000 $305 Confirmed Yes Yes A
Singerlands I NY 42,800 $10,600,000 $248 Confirmed Yes No A
Singerlands II NY 47,800 $12,175,000 $255 Confirmed No No A