Nuveen Fund Acquires $463M Medical Portfolio

Nuveen US Cities Office Fund and an institutional capital partner have acquired a medical portfolio from IRA Capital for $462.9 million, according to Allianz, which structured the lending facility.

The portfolio totals over 747,000 rentable square feet consisting of  27  properties  across 13 states. They include Arizona, California, Florida, Illinois, Michigan, North Carolina, New Jersey, New York, Pennsylvania, Texas and Wisconsin. Twenty of the 27 properties are located in areas where local governments require an extensive approval process to prove that there is a need to develop new healthcare facilities. This process means there are high barriers to entry and regulatory restrictions around new supply.  

The portfolio is 99% occupied by 38 tenants. Ninety-two percent of those are investment-grade credit healthcare systems. In addition, the portfolio’s rent roll has a weighted average unexpired lease term of 12 years.  The portfolio includes traditional medical offices, urgent care centers, outpatient surgeries and specialty treatment centers and specialty hospitals.   

The Nuveen US Cities Office Fund deal was significant for Allianz because of its structure, namely it has a seven-year term with a fixed rate tranche of $163.8 million (70%) and a floating rate tranche of $70.2 (30%). It is first of its kind provided by Allianz Real Estate in the US and Europe. The loan will provide 51% of the total acquisition price of $462.9 million. 

This transaction marks the second US debt deal with Nuveen Real Estate Allianz provided $94 million financing of a six-property industrial portfolio for the investment manager’s US Cities Industrial Fund in 2020.

“COVID-19 has highlighted the need for improved efficiency and ease of access to healthcare, increasing demand for outpatient centers and higher-severity care space within hospitals,” Mike Cale, co-head of US Debt, Allianz Real Estate, United States, said in a prepared statement. ” Medical offices thus represent a unique, resilient asset class poised to further benefit from strong fiscal tailwinds engendered by both the CARES Act and the US small business stimulus program.”  

Nuveen’s deal wasn’t the only notable recent transaction. Earlier this month, Welltower acquired a portfolio of six Class A medical office buildings and properties under construction across in-fill markets in the New York City metro area under a newly formed joint venture with Aspect Health for a pro-rata investment amount of $98 million. In addition, the JV will have a ten-year exclusivity agreement on future development opportunities in the NYC metro area.