DALLAS-The number of healthcare systems that pursue real estate monetization strategies will increase over the next couple of years, providing new opportunities for investors, according to experts who spoke at the 2011 Medical Office Buildings & Healthcare Facilities Conference.
Nearly 700 healthcare real estate executives attended the conference sponsored by the Building Owners & Managers Association and held at Hyatt Regency Downtown. The prediction that healthcare systems will look to off-load both core and non-core real estate assets was made during the event’s opening general session titled “Healthcare Evolution: Scoping the Latest Trends.”
Moderated by Gordon Soderlund, senior vice president and director of business development for Lend Lease DASCO LLC, the panel also included: Dr. Stephen Mansfield, president and CEO of Methodist Dallas Medical Center; Steven Jones, chairman of the board for Hoag Hospital and CEO of Snyder Langston; and Kevin Holloran, director of Standard & Poor’s.
“We will see more systems disposing of real estate, saying ‘let’s monetize that’,” Holloran said during the session. He noted that healthcare systems have emerged from the “hunkered down” state they’ve been in since the collapse of the capital markets.
Healthcare systems have seen their patient volume stabilize, and driven by new federal mandates, they’ve started to invest in operations again. For example, many systems have increased their investment in IT infrastructure to as much as 15% of their total “spend”, Holloran noted. Specifically, healthcare systems are working to either install or upgrade electronic medical record (EMR) systems.
Moreover, healthcare systems are also investing a large amount of money to acquire physician practices. “This is the type of spend that we are seeing in the industry,” Holloran noted.
Instead of turning to the capital markets, specifically the bond market, to fund these investments, Holloran says healthcare systems are increasingly interested in selling both core and non-core real estate assets. Those assets range from acute-care facilities to on-campus and off-campus medical office buildings.
In addition, Holloran says many healthcare systems are looking to their health plans as another source of revenue. Together, the monetization of real estate and the disposition of health plans will fund future investment instead of debt issuance, he contends.
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