Our Healthcare Real Estate Experts Agree: Having Amazing Partnerships Matter Most
A good working relationship is a fundamental aspect in real estate, but arguably more so when it comes to healthcare real estate. Providers need to not only address the needs of their patients, but balance that with the desires of their investment partners and local groups to provide quality healthcare and be good citizens.
Partnership was the theme that emerged for the 300 attendees of Bisnow's 5th Annual Healthcare Real Estate event this morning at Trump International Hotel and Tower. The experts on our investment and development panels kept returning to the subject of partnerships time and again. Here are some highlights.
Our keynote speaker, Rush University Medical Center CEO Dr. Larry Goodman, set the tone early with a discussion on Rush's ongoing expansion strategies. Larry says Rush looks long term and works with contractors and its own employees to design its inpatient and outpatient facilities to correct existing discrepancies and anticipate future needs. An example: Rush gathered input from nurses for the butterfly design of its bed center. As Rush looks at more off-campus sites to reach the needs of its patient base, Larry says the risk is there to stretch his team too thin, but he says it's crucial to get input from staff and contractors, work with the communities where Rush hangs its shingle, and maintain a tight core team to make fast decisions.
The challenges will only get harder in the future. Larry says there are serious healthcare disparities to address down the road, like food deserts in impoverished neighborhoods, educational and job opportunities for residents in areas Rush is entering, and the life span gap between affluent and poorer communities. He notes the average life expectancy of a Gold Coast resident is 85 years, while in some pockets of the South Side the average drops to 62 years. Rush is looking to impact these needier communities in a fundamentally different way.
There's a growing need to ensure off-campus ambulatory centers have everything they need to address any contingency. Larry says healthcare providers need to seriously consider the correct mix of specialties for the communities they're entering.
Tvsdesign director of healthcare planning Tim Gregg (center, with tvsdesign senior business development director Sarah Busch) concurs. He says tvs works with its partners on what the growing need for medical convenience means for the greater community. It's important to research racial, ethnic and gender demographics to determine what specialties to distribute to what neighborhood.
Tim adds that tvs is devising flexible MOB designs in underserved communities to attract larger healthcare groups, citing University of Chicago Medical Center's entry into Englewood as an example.
Northwestern Memorial HealthCare VP of real estate Gina Weldy (snapped during our postgame schmooze) says it's important to listen to the needs of workers, patients and the surrounding community to be a good civic partner. Gina says Northwestern's transformation of the first two floors of its hospital into desirable retail had several benefits. Patients don't feel like they're entering a sterile hospital environment. For workers who often only have 30 minutes for lunch, it's a way to completely decompress from the daily grind. And the retail is a way of giving back to Streeterville residents.
Gina adds that it's important not to let smaller but vocal groups dictate the course of a conversation, citing the emotional debate over the demolition of Historic Prentice Women's Hospital. Gina says healthcare is a life-or-death proposition and coming to the decision to raze Prentice was not made lightly. If the building could have been repurposed for future needs, Gina says it would have been.
MedProperties Group CIO Jesse Ostrow (right, with Polsinelli shareholder Jason Kaplan) sees more ground-up development in the future. The numbers back this: there are 600 MOB projects in the national pipeline, totaling more than 400M SF. Much of it is already pre-leased, and national MOB vacancy rates are at 9%. But there are advantages to adaptive reuse versus new development, mainly speed to market.
With adaptive reuse, Jesse says providers are bringing in teams early in the process to begin interior build-outs sooner. He adds that MedProperties has an open book program where cards are on the table for investors, contractors and providers. This allows for transparency, especially as some build-outs can change midstream.
Here's our investment panel: Ventas senior investment officer Carrie Hiebeler; MedProperties Group CIO Jesse Ostrow; moderator, RSM US partner Mike Nichols; Avison Young principal Mike Wilson; and Harrison Street SVP Mark Burkemper. The panelists agreed the best investment partner is not always the one who makes the highest bid. What a provider is looking for in an investment partner, whether it's a REIT, sovereign or foreign capital, is someone who has the best interests of the asset in mind. Mark says in this relationship, the provider is always right, since they're the ones who are using the buildings, and investors are willing to make the building work for the provider.