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Medical Offices Remain Attractive Amid Pandemic

The coronavirus pandemic has been a boon for industrial real estate as increased online shopping drives up demand for logistics space, but the medical office sector has also fared well in 2020, and experts expect continued strength in that area during and after the pandemic.

While banks are hesitant to lend on properties in the retail and office sectors, financing remains available for medical office properties, experts say. And investors also continue to eye such properties, thinking that demand for services there will pick up once a vaccine is found and becomes widely available.

Here, Law360 looks at three reasons medical office properties remain attractive amid the pandemic:

Banks Are Still Interested in Lending

In the weeks after the World Health Organization declared COVID-19 a pandemic, lending all but stopped for commercial real estate. While capital is still tough to come by for retail and office assets, lenders are now providing financing for the medical office sector.

“Lenders are willing to lend on medical office,” said George Scopetta, chief investment officer at medical office owner and services provider ShareMD. “If you come to market with retail buildings, the answer is going to be no. A medical office building, especially if it’s a stabilized building, that’s an asset class that [parties] want to be in.”

Danielle Gonzalez, a shareholder at Greenberg Traurig LLP, said she has closed more than $800 million in loans on medical office buildings since the pandemic began, including an $89 million loan in late September from Starwood Mortgage Capital for eight properties owned by ShareMD.

She said medical offices, along with multifamily properties, have fared markedly better than other asset classes amid the pandemic. Federal stimulus assistance this summer helped many tenants at multifamily properties continue to pay their rents.

“I see a wide variety of asset classes. Not just medical office. … We have seen the least impact on medical office buildings and multifamily,” Gonzalez said. “It was a small blip on the radar compared to other sectors.”

 

Occupancy Has Remained High

Another reason banks have been willing to lend on medical office properties is due to high occupancy levels there, and tenants have remained in those properties for a variety of reasons.

For one, many medical office tenants were unaffected by shutdown orders earlier in the year. David Tabibian, a partner at Jeffer Mangels Butler & Mitchell LLP, said occupancy rates for the sector have hovered around 90% to 92% during the pandemic.

“Rent collections have been very strong — above 90%. That’s exactly what you want as an investor in an unstable market,” Tabibian said. “They are essential services, and tenants are able to still access their space and are still paying their rent. Historically, [medical office properties] have done well in downturns.”

That has meant landlords have had stronger rent rolls to show to lenders, a domino effect that inspires more confidence.

But another reason occupancy has remained high is that leases at such properties tend to be longer, which means fewer leases have come up for renewal during the pandemic than leases in other sectors.

“Landlords want longer lease terms. That’s why you see higher occupancy levels,” Tabibian said. “There are various types of equipment. … It’s more custom, more expensive, and as a result of that, tenants tend to sign longer leases at medical offices.”

 

More Consumer Demand Is Expected Once a Vaccine Arrives

While the medical office sector has taken a hit during the pandemic when it comes to consumer traffic in and out of facilities, experts expect demand to pick back up once consumers feel safe going in for procedures. That may not be the case for retail and office properties.

“The big distinction is the impact on medical office buildings was very much temporary, whereas the impact that we’re seeing on retail and office is much more permanent in nature,” Gonzalez said. “Once this is over, people are still going to have to go back to their dentist’s office for a root canal or their doctor for a comprehensive medical exam.”

And with real estate investors looking for places to park their capital and shying away from retail and office, medical offices will remain a solid option, experts say.

“Medical office really attracts the long-term, serious investors. There is tons of investment by [real estate investment trusts] and funds and institutional buyers,” Gonzalez said. “These are players that do thorough due diligence and are really looking for strong assets to hold for the long term.”

Expect more investment in the sector in coming months, particularly in the first and second quarters of 2021, said Tabibian, who noted there is lots of cash on the sidelines that could flow into such properties in 2021.

That investor optimism is being fueled by a sense that there will be a rush back to the properties once a vaccine is widely available.

“Telehealth … has its limitations and does not work with every specialty. At some point, doctors need to see their patients and can’t always do that virtually,” Tabibian said. “Many people have not undergone elective procedures during the pandemic. There’s a huge amount of demand for elective procedures … that’s coming as soon as there’s a vaccine.”

 

Source:  Law360

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FIP Commercial’s Roy Faith Reps ShareMD In Purchase Of Three-Building Medical Office Campus In Miami

ShareMD, a healthcare real estate and physician practice solution company with corporate offices in Alpharetta, Georgia, has closed escrow on a three-building, 177,358-square-foot medical office campus situated on ten acres in Miami.

ShareMD was represented by FIP Commercial President/Broker Roy Faith. The seller was a private ownership entity.

The purchase marks ShareMD’s second purchase of a healthcare portfolio in South Florida, following its purchase in November 2019 of a two building, 104,000-square-foot portfolio in Miami. Earlier, in February of this year, ShareMD purchased a 20-story, 498,000 square foot medical/professional tower in Jacksonville. ShareMD has acquired a dozen healthcare and medical/professional properties in the past two years totaling 750,000 square feet in Florida alone, separate from its 170,000-square-foot California healthcare portfolio. ShareMD is funded by private equity firm Martis Capital.

“We’re excited to continue ShareMD’s growth in the healthcare facility sector with this acquisition,” said ShareMD’s Chairman and CEO, John Bardis. Bardis, the former Assistant Secretary of the US Department of Health & Human Services as well as the founder and former head of MedAssets, continued, “ShareMD provides a range of healthcare space and technology solutions, and this addition to our portfolio provides for additional capabilities in the South Florida marketplace.”

 

“We were attracted to this opportunity to further expand our portfolio in South Florida,” said ShareMD founder and Chief Investment Officer, George Scopetta. “And, our team’s private equity backing and our track record of nearly a million square feet of properties purchased over the past two years provided the seller with confidence that we could close quickly, and with certainty.”

 

“This completion of this deal shows the strength of the medical sector,” added Faith. “Even during a pandemic, we managed to successfully close in a timely and efficient manner. Both the Buyer and Seller understood the current climate and managed to close before the expected closing date, which really is a credit to all involved. The healthcare sector continues to be a very sought-after type of asset class especially given where we are today. We have been seeing a lot of interest in MOBs –  not just recently, but for a number of years.”

FIP Commercial’s parent company, The Faith Group, recently developed developed a 105,000-square-foot medical office building. Aventura Medical Tower is a Class A medical condo building and some purchase and lease opportunities remain. Aventura’s first medical condo project is located in the Aventura Hospital District at 2801 NE 213th Street in Aventura, Florida. The Group  also owns seven additional medical office buildings in South Florida, including Venture Center I and II, International City Building I and II, Medical and Executive Center of Aventura, Olympic Professional Offices, Parcel Square Offices.

 

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Co-Working Medical Office Space Operators Plans Major Expansion In Florida

ShareMD, a San Diego-based investment firm led by President and managing partner George Scopetta, is looking to purchase medical office buildings throughout the Sunshine State’s major cities and convert vacant space into its co-working concept. The group has already purchased two buildings, one in South Miami and another in Coral Gables, where it plans to launch the operation in Florida.

The Bilmore Professional Building, located at 475 Biltmore in Coral Gables, Florida, a medical office building totaling ±51,423 square feet, and SOMI Center, a ±50,000-square-foot Class A mixed-use building located at 5966 S. Dixie Highway in South Miami, Florida were purchased by ShareMD for $33,152,500.

The transaction closed October 31.

In Southern California, ShareMD has locations in La Jolla, San Diego, Encinitas, Temecula, Oceanside and Los Angeles.

The company operates as WeShareMD, but is in the process of changing its name. It offers fully furnished medical office space and patient rooms available by the half-day, day, week or month, according to its website. Locations also have private storage areas, meeting space and common waiting rooms.

 

Source:  The Real Deal

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