Private Equity Becomes More Aggressive on MOB Pricing
Much has been made of private investors controlling the buying landscape in recent years. According to Revista, private investors have increased their share of overall MOB buying activity from 55% in 2019 to 69% in 2020 and 70% YTD in 2021.
Along with the increasing share of MOB buying private investors are also showing a willingness to pay more for MOB assets. The cap rate analysis in the chart below shows the TTM average cap rate for private investor buyers and REIT buyers. From the period 1Q2015 through 2Q2017 REITs purchased MOB assets at an average cap rate of 6.49% compared to 6.57% for private investors. While a little choppy on a quarterly basis the trend line in the graph shows private equity becoming more aggressive in the middle part of 2017. In fact, from 3Q2017 to 1Q2021 REITs have purchased MOBs at an average cap rate of 6.48% while private investors have averaged 6.38%. This has come at a time when financing is wide open for private investors and when many new larger funds are targeting the sector.
As we know, these trends can change at any time so stay tuned to Revista data for movements in buyer type trends.