SCOTTSDALE, AZ—National healthcare real estate continues to be a tremendous product type for developers, healthcare providers, and investors. That is according to David Wilson, CCIM, EVP of development at Lockard Cos., based in Cedar Falls, IA. He tells GlobeSt.com that cap rate compression continues to happen throughout the US, and healthcare non-weighted cap rates continue to hover around 6.81% for the 2Q16.
Wilson will serve as a speaker at the upcoming RealShare Healthcare Real Estate conference in Scottsdale, AZ, on December 7 and 8. More than 400 of the industry's top owners, investors, developers, providers, brokers and financiers will be in attendance at the event.
“We have not seen cap rates this low since around the 4Q07,” he says. “Sale prices per square foot are averaging about $244 per square foot and continue to climb.”
In addition, Wilson says he is continuing to see hospital mergers throughout the US, “which is a tremendous plus for real estate investors.” Why? Because, according to Wilson, “credit profiles will continue to become stronger and stronger as the mega-hospitals begin to merge and/or acquire other hospital systems.”
One big example of this that he points to would be the St. Joseph Health and Providence Health merger. “Because of this merger, there will be an operation of 50 hospitals in seven states.” And another big announcement, he cited, was that of Dignity Health and Catholic Health Initiatives (CHI). “This merger, if completed, would have combined revenues of over $27 billion annually.”
Lastly, he says, money rates such as the 10-year US Treasury, Tax Exempt Bonds, and LIBOR remain very low thus causing great opportunities to obtain debt for medical facilities. “Lenders are lending at very aggressive rates,” he explains. “Medical office building lending is still the strongest of the medical property types.”
Other property types, he adds, such as freestanding emergency departments, surgery centers, physician practices, and acute care hospitals “are less attractive to lenders at the stellar rates like MOBs.” He explains that “Developers continue to struggle obtaining construction loans because of banking regulations causing the developers to cough up more equity into each deal thus diminishing their returns.”
All in all, Wilson says, “healthcare real estate has been, and is, a tremendous property-type, and I don't see that changing in the near future whatsoever.”
In order to meet the needs and demands of the changing healthcare industry, real estate professionals need to adapt their strategies to new circumstances. Join us at RealShare Healthcare Real Estate on Dec. 7 and 8 for insights on succeeding in both the right markets and product types as well as navigating and finding opportunities in the more challenging ones. Learn more.
SCOTTSDALE, AZ—National healthcare real estate continues to be a tremendous product type for developers, healthcare providers, and investors. That is according to David Wilson, CCIM, EVP of development at Lockard Cos., based in Cedar Falls, IA. He tells GlobeSt.com that cap rate compression continues to happen throughout the US, and healthcare non-weighted cap rates continue to hover around 6.81% for the 2Q16.
Wilson will serve as a speaker at the upcoming RealShare Healthcare Real Estate conference in Scottsdale, AZ, on December 7 and 8. More than 400 of the industry's top owners, investors, developers, providers, brokers and financiers will be in attendance at the event.
“We have not seen cap rates this low since around the 4Q07,” he says. “Sale prices per square foot are averaging about $244 per square foot and continue to climb.”
In addition, Wilson says he is continuing to see hospital mergers throughout the US, “which is a tremendous plus for real estate investors.” Why? Because, according to Wilson, “credit profiles will continue to become stronger and stronger as the mega-hospitals begin to merge and/or acquire other hospital systems.”
One big example of this that he points to would be the St. Joseph Health and Providence Health merger. “Because of this merger, there will be an operation of 50 hospitals in seven states.” And another big announcement, he cited, was that of Dignity Health and Catholic Health Initiatives (CHI). “This merger, if completed, would have combined revenues of over $27 billion annually.”
Lastly, he says, money rates such as the 10-year US Treasury, Tax Exempt Bonds, and LIBOR remain very low thus causing great opportunities to obtain debt for medical facilities. “Lenders are lending at very aggressive rates,” he explains. “Medical office building lending is still the strongest of the medical property types.”
Other property types, he adds, such as freestanding emergency departments, surgery centers, physician practices, and acute care hospitals “are less attractive to lenders at the stellar rates like MOBs.” He explains that “Developers continue to struggle obtaining construction loans because of banking regulations causing the developers to cough up more equity into each deal thus diminishing their returns.”
All in all, Wilson says, “healthcare real estate has been, and is, a tremendous property-type, and I don't see that changing in the near future whatsoever.”
In order to meet the needs and demands of the changing healthcare industry, real estate professionals need to adapt their strategies to new circumstances. Join us at RealShare Healthcare Real Estate on Dec. 7 and 8 for insights on succeeding in both the right markets and product types as well as navigating and finding opportunities in the more challenging ones. Learn more.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
