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Welltower Kicks Off 2019 With $1.25B MOB Acquisition

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Welltower Inc. has signed a deal to buy 55 medical office and outpatient facilities from CNL Healthcare Properties for $1.25B. 

Doctor, medical offices, healthcare

The deal, which will close during the first half of 2019, is one of the largest medical office building trades in recent years, though less than when Healthcare Trust of America bought Duke Realty Corp.’s entire medical office portfolio for $2.75B in 2017.

The CNL Healthcare portfolio is geographically diverse, totaling about 3.3M SF in 16 states. The properties are about 94% occupied and most of them are affiliated with a major healthcare system, including Novant, Memorial Hermann and Cleveland Clinic.

Among other medical office properties, CNL Healthcare owns Midtown Medical Plaza and Presbyterian Medical Tower, both in Charlotte, North Carolina, along with Bend Memorial Clinic in Bend, Oregon, and Center One in Jacksonville, Florida.

"With market potential metrics and low risk factors, along with a healthy initial cash yield, good escalators and low capital expenditure requirements, this investment will provide an excellent total return," Welltower Chief Investment Officer Shankh Mitra said in a statement.

Welltower has been an active buyer of healthcare-related properties in recent years, anticipating a heightened need for such facilities as baby boomers advance from late middle age and early retirement into full-fledged old age.

Last year, Toledo, Ohio-based Welltower acquired Quality Care Properties for nearly $2B. At the same time, Welltower formed an 80/20 joint venture with ProMedica Health System that included the real estate of Quality Care’s principal tenants, HCR ManorCare and Arden Courts.

"In any given year, three-quarters of our investments are acquisitions and one quarter are developments,” Welltower Senior Vice President Mike Noto told Bisnow in 2017. “We look for buildings that are strategic to hospitals and the delivery of healthcare."

Last year, CNL Healthcare, a REIT that is part of CNL Financial Group and which specializes in healthcare assets and senior housing, put 63 MOBs, post-acute care facilities and specialty hospitals on the market.

The 55 properties involved in the sale to Welltower were all from among that larger portfolio. HFF Securities and KeyBanc Capital Markets marketed the properties for Orlando-based CNL Healthcare.