The Dominance of MOBs
If you’re hoping to be a landlord for a major hospital system, look into MOBs. (Not literally though, there's strict doctor-patient confidentiality laws.) Experts at Bisnow’s Healthcare Real Estate Summit say that sector is taking off.
350 attendees braved the flooding yesterday morning to get the skinny on healthcare real estate. (Hopefully no one caught a cold.)
VMG Health director of real estate services John Trabold says institutional systems still mostly want to own and control their own hospitals, but more and more are willing to go third party on MOBs. That drove an astounding $7B of MOB transactions last year. Those averaged a 7.6% cap, and the primo single-tenant properties are in the low 6% range. We’re expecting to see John all over billboards soon—you get a ton of endorsement deals after winning the 50 and over Texas table tennis championships, right?
Caddis Partners SVP of development Jud Jacobs (pictured with Duke Realty’s Steve Wheeler) says “retail style” MOBs (these may not be actually in retail properties but are located and designed like shopping centers) are sometimes more desirable and are pricing better than on-campus assets. Jud, whose firm did $100M in healthcare development and acquisitions last year, almost wasn’t in the biz at all—he was a plumber’s helper through high school and nearly became one himself.
The user is the most important factor when Health Care REIT VP of operations Kevin Kirn makes investment decisions—94% of his MOBs have major hospital system affiliations. (Don't we all wish we had famous friends?) Behind that are location and the building itself (particularly its age and flexibility). Kevin’s secret skill: Zamboni-driving. (He did it in college.)
Milestone Project Management prez Scott LaTulipe, who was in a heavy metal band in high school, says MOBs have gotten more technologically complex. (We found Scott, right, with Rogers O’Brien’s Gregg Lynch, and doesn’t he look like he’s in on a great secret?) In the last cycle, MOBs were mostly just a building of exam rooms. Now, they include features like emergency power and medical gas that used to be reserved for institutional product. He’s also seeing MOBs that can flex into hospitals, like a project he’s doing in Pearland.
Read King Medical Development prez Tim Delgado says the trend of freestanding ER/urgent care facilities in retail strip centers is stronger in Houston than other cities. That’s partially thanks to Texas law, which allows groups that aren’t affiliated with hospital systems to operate these facilities (not all states do). He says we’ll continue to see these multiply; there are 9,000 urgent-care facilities in retail centers across the US, and that’s projected to rise to 12,000 in the next three years. Tim admits he’s an opera geek—his daughter sings opera and now he can’t get enough of it.
Our moderator Browne McGregor Architects principal Charles Browne (here with Page’s Christopher Tidwell) used to manage a ski team. His firm is in its 20th year of business and focuses heavily on healthcare. (One more year and they'll be allowed to focus on liquor stores.) Recently, it designed the St. Luke’s Woodlands project, a very technical buildout (Charles got to work with Scott on that one).
We snapped our sponsor Formation’s Phillip LeBlanc, Erich Theaman, and Shawn Wright. Formation “makes sense of the built environment” through wayfinding and branding. The firm recently completed projects for Baylor College of Medicine and a Memorial Hermann convenient-care center, and they’re working on several Memorial Hermann projects across town.