NorthWest Healthcare Buys $600M Healthcare Portfolio

NorthWest Healthcare Properties has acquired a 27-property, 1.2 million-square-foot healthcare portfolio from Harrison Street for $600 million. The portfolio is located in 10 states, and it is 97% occupied.

The portfolio has a mix of medical office and healthcare property types. It includes 15 medical office buildings, five micro-hospitals, four behavioral hospitals, two inpatient rehabilitation hospitals, one heart and one surgical hospital. Geographically, nine properties are in Arizona; five properties are in Texas; five are in Illinois; two properties are in Florida and one property each is located in Minnesota, Massachusetts, California, Oklahoma, Colorado and Indiana.

Additionally, the portfolio has strong tenancy. The roster of current occupants is Advocate Aurora Health, Rush University Medical Center, Memorial Hermann, Ascension, Banner Health, Tenet Health, Lutheran Health Network, Baylor Scott & White Health and Edward-Elmhurst Healthcare.

The healthcare industry expanded rapidly last year, making the asset class one of the beneficiaries of the pandemic, and it is growing. National healthcare spending is expected to surpass $5.2 trillion by 2025, and according to John Chang, SVP and national director of research services at Marcus & Millichap at a healthcare conference in December, “The spending on healthcare and healthcare related services continues to rise and that drives the need for medical space,” he said. “There has generally been a migration southward and that is where we are seeing the greatest demand and need emerging.” From a leasing perspective, he expects vacancy to continue to fall this year while investment activity has already returned to pre-COVID levels.

Meridian CEO John Pollock is also bullish on the sector this year. He expects the transition to outpatient facilities to accelerate; more focus on telehealth and for providers will increase focus on behavioral health. These trends are driving his investment decisions in the space. “Institutional investors have warmed up to having behavioral health tenants in their buildings and portfolios, and we have even seen cap rates move toward traditional medical office building valuations,” said Pollock in an earlier interview with GlobeSt.com. “It’s very exciting to be a part of creating more access to these much-needed services in our communities.”

JLL Healthcare Capital Markets represented the seller in the deal. Senior managing directors Mindy Berman, Evan Kovac, Andrew Milne and Brian Bacharach and managing directors Tim Joyce and Brannan Knott, with support from VPs Trent Jemmett and CJ Kodani led the team.