October 24, 2019
John B. Mugford

Kaiser Still King of Medical Real Estate Ownership; UnitedHealth Group is on the Rise

It doesn’t look as if anyone is going to dethrone Oakland, Calif.-based Kaiser Permanente as the country’s largest owner of medical real estate anytime soon.

For the sixth consecutive year, Kaiser, a health insurer and provider with 8.6 million members in nine states, sat atop the annual “2018 Top 50 Owners of Medical Real Estate” report compiled by Revista, which gathers and provides a wide variety of healthcare real estate (HRE) data, statistics and reports for its subscribing members.

According to the report, Kaiser’s portfolio of gross real estate assets was worth an estimated $40.5 billion as of the end of 2018, an increase of 4.9 percent from 2017, when its portfolio was worth an estimated $38.6 billion.

As noted, Kaiser is likely to hold the top spot for quite some time, as it remained well ahead of the next biggest owner, Toledo, Ohio-based Welltower Inc. (NYSE: WELL), whose portfolio had a total value of $31.4 billion as of the end of 2018.

The “Top 50” report indicates that a relative newcomer to the medical real estate space has made a quite a prolific leap in ownership in recent years. That firm is Minnetonka, Minn.-based UnitedHealth Group Inc. (NYSE: UNH), a for-profit managed healthcare company that continues to expand into other areas of the industry, including providing care and, as it turns out, real estate.

According to a portion of the “Top 50” report that ranks entities by year-over-year portfolio growth, UnitedHealth Group saw its portfolio grow 23.8 percent in 2018 alone, bringing the value of its properties to $5 billion. Such a big increase represents a recent pattern for UnitedHealth Group, which increased the size of its portfolio by 30.7 percent in 2016 and 17.2 percent in 2017. As of the end of 2018, UnitedHealth Group ranked as the 28th largest owner of medical real estate, according to the Revista report.

“UnitedHealth Group reports diversified growth along all of their business lines,” Revista Principal Mike Hargrave says. “They are acquiring many regional health plans and networks, which often have associated real estate for care, services and offices.”

Mr. Hargrave adds that UnitedHealth Group is likely to continue to grow its real estate holdings in 2019, as its subsidiary, Eden Prairie, Minn.-based Optum Health, in June completed a $4.9 billion purchase of Davita Medical Group from Denver-based Davita Inc. (NYSE: DVA). Davita Medical Group, he notes, has “a stable of physician office buildings in its portfolio.”

As for the largest owners of medical real estate, health systems continued to dominate the landscape in 2018, with a few healthcare-focused real estate investment trusts (REITs) mixed in among them. The REITs cracking the top 10 in ownership in 2018 remained Chicago-based Ventas Inc. (NYSE: VTR), which ranked third with a portfolio valued at $25 billion, and Irvine, Calif.-based HCP Inc. (NYSE: HCP), which was ranked sixth with a portfolio valued at $13.1 billion.

Health systems comprised the remainder of the 10 biggest owners, with St. Louis-based Ascension Health Alliance, a not-for-profit system, in fourth place with a portfolio worth $20.6 billion, and Nashville, Tenn.-based for-profit provider HCA Inc., with a portfolio worth $19.4 billion, rounding out the top five.

Overall, the combined value of the portfolios held by the top 50 owners of medical real estate increased significantly in 2018, according to the Revista report, as those entities’ portfolios grew, in aggregate, by 5.2 percent year-over-year from 2017. At the end of 2018, the medical real estate owned by the top 50 owners was valued at $400.6 billion, compared to $380.8 billion in 2017.

Mr. Hargrave notes that health systems “within the top 50 owners are growing their real estate portfolios primarily through new construction.  Not-for-profit health systems were running a construction versus gross real estate assets ratio of 8.7 percent in 2018. This fuels real estate growth within that group.”

Revista compiles the report, according to Mr. Hargrave, “to provide stakeholders a viewpoint and analysis on the largest owners of healthcare real estate. Real estate is a very important component of the healthcare delivery system and is often the number one or two largest items on many healthcare system’s balance sheet.”

The Top 50 report, he adds, is designed to provide a “snapshot” of the country’s top medical real estate owners as of the end of 2018. The report includes only entities whose portfolios are predominantly comprised of what Mr. Hargrave calls “true healthcare” facilities, such as MOBs, hospitals, post-acute and rehabilitation facilities, skilled nursing facilities (SNFs) and others.

Revista’s Top 50 owners report is available to the firm’s subscribers at RevistaMed.com. (Subscription required)

John B. Mugford is the editor of Healthcare Real Estate Insights. For more information on HREI – please visit HREInsights.com