Bain JV Pays Albany Rd Near $160M for MOB CRE; Newmark Negotiates 18-Building, 575,000-SF Trade

As reported in The Real Reporter by Joe Clements

PROVIDENCE RI — Albany Road Real Estate Partner’s shift towards medical occupancy buildings has paid of in less than five years via the just-concluded sale of an 18-building, 575,000-sf portfolio clustered between southeastern Massachusetts and metropolitan Providence, a package listed by Newmark said to be bringing nearly $160 million from a victorious venture led by homegrown Bain Capital that outdueled an energized and expanding roster of competitors seeking “safe havens” for CRE holdings in a post-pandemic economy.

“We are extremely pleased with the results,” Albany Road founding principal and President Christopher J. Knisley tells Real Reporter after MOB-hungry entities from across the land took a run at the opportunity Bain secured with Evergreen Medical Properties in a nascent national program making an auspicious entry into the back yard of Boston-based Bain, no stranger to the MOB arena. The transaction amounts to the largest such purchase ever in New England, maintains Newmark Senior Managing Director Michael Greeley, a principal in the firm’s Medical Academic practice group.

“This is an incredible outcome for Albany Road,” Greeley marvels of an acquisition program dating to April 2017 compiling an assemblage hefty enough to draw a “Who’s Who” of established MOB investors plus formidable newcomers getting religion on the healthcare niche as Covid 19 enhances the sector’s significance. Mainstream capital “was moving in that direction anyway, but (the pandemic) certainly amplifed the changes,” observes Greeley, part of the specialty group which includes founding principal and Executive Managing Director Frank Nelson and Robert E. Grifn Jr., now US Head of Investments, for the frm which is a leading advisor in MOB sales helping identify viable prospects.

Knisley deems the Newmark drumbeat that was fortified by Hayes & Sherry Senior VP Matthew Fair offering local leasing expertise “everything we could have hoped for in the number and the quality” of the suitors answering a clarion call to “yield-starved” investors pining for long-term stability and value-add components which the so-called “I-95 Portfolio” could deliver in a market covering 1.6 million health care consumers, the holdings sporting 93 percent occupancy and a trio of leading medical providers as the core tenant base.

“They took three smaller investments and created a scale and relevance large enough to get the attention of a Who’s Who of MOB investors,” Greeley recounts, adding, “it was an entrepreneurial and visionary approach that paid of handsomely for Albany Road and provided an attractive entry for the buyers,” with kudos for them for “executing fawlessly up against a robust (process) that was as competitive as we have ever seen.”

Including the brokerage shop, bound by confdentiality restrictions, parties involved are keeping mum on the cost of entry Bain and Evergreen needed to buy the holdings, while the geography covering two states and multiple registry of deeds is making it even more challenging to fnd the precise amount, but several market watchers peg the value in the upper $150 million range and one informed account declares it “very close” to $160 million. Albany Road paid an aggregate $127.1 million in the purchases between April 2017 and May 2020. A Real Reporter article this spring when the I-95 Portfolio as it was branded was launched had estimates around $150 million, suggesting the brisk demand helped push the fgure upwards.

The initial Albany Road deal brought 10 medical office buildings totaling 302,000 sf in East Greenwich and Providence, RI, assets purchased for $60.5 million- $201 per sf-leased by leading healthcare provider Lifespan and Miriam Hospital. The special-purpose vehicle was one of the last acquisitions made before Albany Road moved to a fund model, with the second investment coming in October 2018 under its Fund II that spent $21 million for a half-dozen medical office buildings with surgical capabilities in Dartmouth and Taunton totaling 93,000 sf. Two were fee-simple interests and the rest were condominium formats, the latter portion bought in April 2020 for $2.5 million. Claris Vision and Southcoast Hospital Group occupy the Bay State properties at 49 and 51 State Rd. in Dartmouth and 64 Winter St. in Taunton.

Albany Road made its way back to the Ocean State for the third piece of the puzzle, paying $43.1 million in May 2020 on a trio of medical ofce assets totaling 217,000 sf in Providence, that piece known as the West River Medical Center. Lifespan and Miriam Hospital are tenants of those assets which includes the newly constructed 180 Corliss St. That purchase was made on behalf of the frm’s Fund III.

Besides the deal with Bain and Evergreen, Albany Road last December harvested part of the original package it had acquired, selling it in a trade for $18.7 million, that asset at 1454 S. County Trail in East Greenwich, RI, going to a joint venture between Anchor Health Properties and Carlyle Group. Lifespan leases that 48,000-sf building for a cancer center, with Albany Road extending the term to 2032 prior to its sale which Newmark also orchestrated. The impressive pricing of $388 per sf compares to a $201 per sf fgure that Albany Road paid for the entire package.

“Albany Road did an excellent job of improving value under their ownership,” says Greeley who notes the cohesive nature of the holdings. “It is a case study in how to create a scale and value investors can respond to which did not exist before,” he says. Albany Road principal Tyler Savonen says the ardent response to that East Greenwich listing inspired the frm in conjunction with other trends. “Given the overall strength of the national MOB market, we believed it was the perfect opportunity to realize our aggregation strategy and bring the remaining assets to the market via a portfolio sale,” explains Savonen. “We felt that given the scale of the portfolio, convenient locations adjacent to major interstates throughout Rhode Island and Massachusetts, and the overall strength of the portfolio’s rent roll anchored by Lifespan and Lifespan afliates, the sale process would successfully draw the attention of national medical office buyers.”

A key component in the impressive returns was the help of advisory professionals at Newmark and the local expertise of Hayes & Sherry Senior VP Matthew Fair, according to Albany Road princial Jeffrey Foresman. “We cant’t thank Mike and his team at Newmark enough for the extensive amount of work that went into marketing the portfolio and ultimately making the transaction successful,” Foresman relays. ”It would not have been possible without Matt Fair and his team at Hayes and Sherry as well for their efforts in providing local knowledge across each asset and respective submarket.”

Foresman provided kudos as well to the portfolio’s major tenant. “We would also like to thank Lifespan for the strong relationship we were able to build during our ownership of the assets,” he says, while Knisley says the pedigree and verve of the bidders Newmark drummed up was “inspiring,” with Bain and Evergreen initially focusing its attention on the southeastern US. “We’d especially like to commend Evergreen Medical Properties and Bain Capital Real Estate for their expertise and professionalism, which were evident throughout a long and complicated sales process,” Knisley offers, adding,“We wish them   the utmost success with the entire portfolio.”

Rhode Island assets changing hands include 6 and 7 Blackstone Valley Place and OneCommerce St. in Lincoln, 1351 and 1405 South County Trail in East Greenwich and Providence addresses at 195-208 Collyer St., 180-200 Corliss St. and 146-148 West River St.