While private equity investors look for new ways to generate returns on their cash, one sector they appear to be turning their attention to is health care real estate – snapping up everything from medical offices to senior living spaces.
Continue Reading Below
As previously reported by FOX Business, private equity deals in the sector have more than doubled over the past decade, to 788 in 2018 from 325 in 2008. There were a record number of deals in 2018, representing more than $100 billion in total value.
And – over the past year alone – private equity investors have made billions of dollars in real estate trades in the space, top players and advisers told The Real Deal.
In the 12 months ending in August 2018, private investors made up nearly 80 percent of all health care real estate sales, according to a report from Revista.
During a recent GlobeSt. health care conference panel, Darryl Freling, managing principal of MedProperties Realty Advisors, said the space is becoming more attractive as investors look to cycle out of broader real estate investments. He expects the momentum to carry through into 2020.
Private equity and REIT (real estate investment trust) involvement have accelerated a focus on outpatient facilities – as opposed to large medical buildings. These include facilities like freestanding emergency rooms and other specialty services aimed at improving the experience for patients.
Last month, real estate investment trust company Welltower bought a 29-property medical office building portfolio for $787 million, and it also invested $885 million across four outpatient medical transactions.
This week, NorthWest Healthcare Properties Real Estate Investment Trust announced $225 million in equity financing, with BMO Capital Markets, RBC Capital markets and Scotiabank serving as underwriters for its public offering.
On Wednesday, alternative real assets investment firm Harrison Street announced the acquisition of senior living properties managed by Brightview Senior Living.
“This portfolio acquisition is consistent with Harrison Street’s broader healthcare real estate strategy and highlights the strong demand for high-quality assisted living and memory care service assets," Michael Gordon, a senior managing director at Harrison Street, said in a statement.
Senior facilities are emerging as a popular investment avenue as Baby Boomers age – and as Americans live longer.
The increasing role of private equity in the health care space, however, has caused concerns about whether the activity is to blame for surprise medical bills. In September, lawmakers launched an investigation into the practices of private equity firms and surprise billing.