BOYNTON BEACH, FL-Even though sales of healthcare real estate have tapered off this year from a very strong 2012, demand has seemingly remained strong for high-quality, hospital-affiliated MOBs. A recent acquisition by one of the country's largest healthcare real estate investment trusts supports this notion.

Toledo, OH-based Health Care REIT paid $49.5 million for the 133,000-square foot Bethesda Health City in Boynton Beach, about 50 miles north of Miami. The main tenant in the 98%- occupied medical mall is the two-hospital Boynton Beach-based Bethesda Health System.

Benefitting from the strong healthcare real estate market is the seller, a joint venture partnership of Miami-based Flagler Investment Property Group and Bahrain-based Investcorp Real Estate, which has an office in New York. Just two years ago, in the second half of 2011, the JV paid Bethesda Health $37 million for the facility in an off-market transaction

Since then, the JV has spent about $1.5 million in capital improvements, including installing new roofing and HVAC systems, upgrading the common areas and landscaping, and improving signage to help patients find their doctors more easily.

By selling the property for $49.5 million, the JV experienced a net gain of $11 million or so (a figure that includes its capital investment), or about 29%.

“Demand has definitely increased, especially in the last six to 12 months and especially for facilities like this, which are of great importance to the people in the area and that have an affiliation with a strong health system,” says Chris Coots, who co-founded Flagler Investment with Didier Choukroun.

When the building was developed in 1996 by Bethesda Health, it was considered one of the first medical malls in the country. Often defined as large, “one-stop” outpatient facilities offering a wide variety of services for patients, such facilities have become much more commonplace in recent years.

Bethesda Health City is in the heart of a residential and retail area of Boyton Beach. With four entrances, the mall is surrounded by a circular parking lot, allowing patients to park close to their destinations. Bethesda Health is the major tenant, occupying about 65,000 square feet. It is two years into a 15-year lease.

According to Coots, the JV did not market the medical mall; Health Care REIT acquired it in what he called an “off-market deal.” While he would not comment on how buyer and seller came together, he noted that a number of investors approached the JV in the last year or so about acquiring the complex.

In addition to making capital improvements, Flagler secured entitlements from Palm Beach County that allow an expansion of up to 100,000 square feet of new space on the campus.

“In a populated area like this in Palm Beach County and with the facility about 98 percent occupied as it is, having the capability to develop more space there is quite valuable,” Coots adds.

Following the sale, Flagler officials say they are in “high acquisition mode,” on the lookout for off-campus medical facilities in Florida, Georgia, or Texas that have affiliations with health systems or large group practices.

John B. Mugford is the Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.