Nuveen-NexCore acquire MOB/life science portfolio for $620.4M; price for the 27 MOBs was $463M
What started out as a potential recapitalization of a portion of IRA Capital’s healthcare real estate (HRE) portfolio turned into the biggest MOB deal to date in 2021.
The Irvine, Calif.-based real estate investor, which has acquired nine HRE properties for a total of $117.5 million over the last year, recently sold a portfolio of 27 MOBs and two life science facilities for $620.4 million. The MOB portion of the deal totaled includes 27 facilities in 13 states with a total of more than 747,000 square feet of gross leasable space. The price for the MOB portfolio was $463 million, which, as noted, was the largest deal year-to-date as of mid-August.
The buyer of the MOB/life science portfolio was a joint venture of Chicago-based Nuveen Real Estate, one of the five largest global real estate investment managers, and Denver-based NexCore Group LLC, a long-time HRE facilities developer, owner and manager.
As noted, IRA decided to sell the portfolio after it had looked into recapitalizing a large portion of its healthcare portfolio, according to Amer Kasm, principal and co-founder, who adds that the firm had engaged a team with New York-based Eastdil Secured to explore the possibility of a recap.
“After running a process for the recapitalization, we decided that a recapitalization was much more complex than anticipated given some potential conflicts that were created, so we decided to pursue a sale,” Mr. Kasm says. “The sale gives us additional buying power of about $1.2 billion, which we look forward to continue deploying in healthcare real estate and some other asset classes.”
According to Allianz Real Estate, which provided the buyer with a $234 million loan for the purchase of the MOBs, 20 of the MOBs are in states with Certificate of Need (CON) requirements, meaning they are in high barrier-to-entry markets.
The MOB portfolio is “99 percent occupied by 38 tenants, of which 92 percent are investment-grade credit healthcare systems,” according to Allianz. “The portfolio rent roll benefits from a weighted average unexpired lease term (WALT) of 12 years… The portfolio is well-diversified across traditional medical offices, urgent care centers, outpatient surgeries and specialty treatment centers, and specialty hospitals.”
When the decision was made to sell the portfolio, Eastdil presented the opportunity to a “select pool of qualified” investors, according to those involved in the transaction.
With the purchase, NexCore’s managed portfolio now totals about 93 properties with about 6.5 million square feet in 26 states.
That portfolio is sure to increase as a result of NexCore’s partnership with Nuveen, which started in late 2020.
While Nuveen has invested in HRE facilities in the past through various funds, with NexCore serving as its “strategic advisor, partner, and property manager targeting developments, acquisitions, and sale-leasebacks in the healthcare and life sciences asset classes,” the partnership is “structured to dramatically expand our collective footprint to include a national presence in credit healthcare assets,” says Todd Varney, chief development officer and managing partner.
Since November 2020, NexCore and Nuveen have partnered on more than $687 million in acquisitions, including 34 buildings comprising 1.4 million square feet, as well as two additional buildings in development, which will add another 200,000 square feet.
For NexCore, which has long been involved in MOBs and has recently branched into senior housing facilities as well, the recent transaction represents its move into the life science real estate sector as well.
According to Mr. Varney, “we are making a significant investment in life sciences acquisitions and development, as we currently have three life sciences projects in predevelopment in Boulder, Colo., Los Angeles and Irvine, Calif. We will be announcing more about those projects soon.”
For IRA Capital, the sale still leaves it with a significant portfolio, which according to Mr. Kasm is valued at about $750 million. The transaction with Nuveen-NexCore represents its second large sale in the past year or more, as in early 2020 it sold a portfolio of 18 MOBs to Welltower Inc. (NYSE: WELL) for an undisclosed price.
“(We) continue building upon (our) medical office portfolio throughout COVID, with a primary focus on shifting (our) strategy towards health-system transactions,” according to IRA.
The company, according to Mr. Kasm, goes into “all our investments with a minimum five- to seven-year holding period, sometimes longer. In certain instances, we may decide to exit sooner as a result of certain factors.”
As it looks to the next year or so, IRA is planning to invest up to $1 billion, as noted, with a heavy emphasis on healthcare facilities.