As reported in The Real Reporter by Joe Clements
PROVIDENCE, RI—CRE capital source saficted with Covid-induced jitters over traditional investments are taking a shot at medical-related real estate as their remedy, but many find that cure has complications from modest deal sizes and anemic capitalization rates constricted by healthcare’s prescription as a recessionary—and pandemic—safe haven.
Now, however, investors proceeding with an abundance of caution while yearning for yield are getting help from Albany Road Real Estate Partners, the Boston-based frm salving MOB maladies with a 573,500-sf opportunity launched amid buzz the 18- building “I-95 Medical Ofce Portfolio” in southeastern Massachusetts and neighboring Rhode Island could bring upwards of $150 million via an exclusive listing by Newmark.
“It is rare to see something like this come available,” Newmark Senior Managing Director Michael Greeley observes in acknowledging his firm’s Medical Academic practice group is pitching Albany Road’s quartet of MOB clusters presciently assembled in multiple purchases between April 2017 and this past May. The deal is strategically structured with blue-chip tenants balanced by of-campus practitioners and specialists whose “sticky tenancies” provide a booster for those craving a spoonful of upside while taking their MOB medicine.
“The national MOB market . . . is unquestionably ‘yield-starved’ at the moment, and the I-95 Medical Ofce Portfolio ofers both long-term stability and value-add elements,” Greeley relays, adding, “that is a very attractive combination at this time.”
On a team featuring Executive Managing Director Frank Nelson and US Co-Head of Capital Investments Robert E. Grifn Jr., Greeley stresses the chance for a buyer to become primary landlord of dominant Ocean State health providers Lifespan and Care New England, those titans in the final stages of a merger featuring Brown University in Providence which promises to create “a unified academic-medical center and integrated healthcare system.”
That platform will feed of Rhode Island’s marquee medical center, the 247-bed Miriam Hospital in downtown Providence which Lifespan operates. Albany Road assets there are adjacent to Interstate 95 and within two miles or less of the Miriam facility. Featuring West River Center at 146-148 West River St. and its fully leased 156,800-sf constitution housing 11 tenants, the Providence holdings include 195 and 208 Collyer St. where their combined 73,500 sf footprint is 97 percent leased to Lifespan and Miriam Hospital units. The same two providers Fll 93 percent of 59,700 sf comprising 180-200 Corliss St.
All told, the portfolio is 93 percent leased with a weighted average lease term of 4.4 years as of mid-year 2021. The 573,500 sf being harvested has 62 percent credit hospital tenancy while anchor tenants Lifespan and Miriam Hospital have a 5.9-year WALT for their 259,850 sf occupied. According to Greeley, “that gives a new owner a very strong stability element” which should be cemented with the upcoming merger. “That is definitely a positive going forward,” he says.
On the upside side of the equation, Newmark alludes to macro trends showing outpatient facilities are enjoying increased patient traffic, a trend that has been evolving over the past decade which has been hastened by Covid-19. A buyer should be able to expect rents will continue to increase, informational materials on the portfolio argue, “with tangible upside potential via the lease-up of existing availabilities and the mark-to-market of in- place rental rates, which can be achieved along with the execution of moderate capital improvement programs.”
“You can significantly growNOI,”says Greeley, with other gains coming from conversion of “legacy office space” into medical functions and flling the estimated 7 percent of the portfolio currently not spoken for, product Greeley says will benefit from a lack of modern inventory in the suburban markets.
In Massachusetts, Albany Road has a six-building MOB package in Dartmouth and Taunton comprising 103,100 sf bought mostly in October 2018 save for 10,000 picked up a year ago next month. A baker’s dozen of tenants occupy 93 percent of that space at 49-51 State Rd. in Dartmouth and 64 Winthrop St. in Taunton. Eyehealth Vision Centers, Northeast Medical Research Associates (NEMRA) and top-fight Southcoast Health are among the key tenants in that cluster.
Back in Rhode Island, Albany Road had purchased 216,000 sf comprising 180 and 200 Corliss St. plus the West River Medical Center in May 2020. That deal complemented its original 10-building, 301,700-sf acquisition in April 2017 of 195 and 208 Collyer St. coupled with assets in Lincoln at 1 Commerce St. and 6 and 7 Blackstone Valley Pl. Another three buildings secured are in East Greenwich, i.e. 1351, 1405 and 1454 S. County Trail, the latter of which was harvested in December when Anchor Medical and Carlyle paid $18.7 million for that 48,000-sf building, or a healthy $390 per sf.
Should the I-95 assemblage deliver the $150 million some estimates are predicting, that would equate to about $260 per sf. Newmark is listing the package minus any pricing expectations. Greeley declined to comment on the unofcial prognostications, but does report that “The early response has been tremendous,” with multple unidentifed institutional investors already making inquiries.
“The I-95 Medical Office Portfolio is the result of thoughtful aggregation by Albany Road . . . which is delivering a unique opportunity to achieve significant regional scale,” says Greeley. “We are very excited to make this available, and expect (investors) will also be really energized over it . . . especially in the current environment and considering the rare opportunity being presented in such a dynamic market.”
Besides the Medical Academic contingent which specializes in the “meds and eds” realm, Newmark has engaged colleagues from across the country with healthcare acumen including Executive Managing Director Ben Appel, Senior Managing Director Jay Miele and Managing Director John Nero. Hayes & Sherry Senior VP Matthew Fair is offering local market expertise in Rhode Island portion.
The Boston office has fnancing experts on hand as well to help bidders seeking leverage assistance and related analysis via Executive Managing Director David Douvadjian Sr. and Senior Financial Analyst Dominick Romano.
Still active in New England, Albany Road Real Estate Partners has a national footprint of CRE with its headquarters in Boston complemented by ofces across the US. The frm which will celebrate its 10th year in business this summer is led by founding principal and President Christopher J. Knisley.