HCP Forms $605M Medical Office Joint Venture With Morgan Stanley

by Camren Skelton

IRVINE, CALIF. — Irvine-based real estate investment trust HCP (NYSE: HCP) has entered into a definitive agreement to form a new $605 million joint venture with Morgan Stanley Real Estate Investment (MSREI) on a 2 million-square-foot medical office building portfolio.

MSREI will provide cash to the joint venture for a 49 percent stake, while HCP will contribute nine wholly owned medical office buildings valued at approximately $320 million. These assets, located primarily in Texas and Florida, comprise 1.2 million square feet of leasable space and are 80 percent occupied.

The joint venture will use the cash contributed by MSREI to fund the $285 million acquisition of a medical office portfolio in Greenville, S.C. Healthcare Trust of America Inc. (NYSE: HTA) has agreed to sell the Greenville portfolio, which includes 16 medical office buildings totaling approximately 856,000 square feet. HTA originally acquired the portfolio in 2009 for $163 million as part of a sale-leaseback transaction.

HCP and MSREI will immediately market for sale three of the smaller assets within the Greenville portfolio, leaving the venture with a combined 832,000 square feet of leasable space.

Greenville Health System, the largest health system in South Carolina, occupies 94 percent of the portfolio’s square footage. HCP and MSREI have reached an agreement with the healthcare provider to enter into new 10-year leases concurrent with the closing of the acquisition, which is expected to occur in the third quarter.

The joint venture is the second between HCP and MSREI. The first joint venture holds a portfolio of medical office buildings that was acquired in 2015 for $225 million. Following the closing of the above transactions, the HCP and MSREI relationship will span 3.2 million square feet of leasable space across 33 properties.

All told, HCP’s portfolio encompasses more than 700 properties diversified across life science, medical office and seniors housing. The company’s stock priced closed at $26 per share on Wednesday, Aug. 1, down from $30.03 per share a year ago.

MSREI, the real estate investment management arm of New York-based investment banking company Morgan Stanley, currently has $36 billion in assets under management.

Scottsdale, Ariz.-based HTA is the largest dedicated owner and operator of medical office buildings in the United States. The company’s portfolio comprises more than 24.1 million square feet, with more than $7 billion invested primarily in medical office buildings. HTA’s stock price closed at $27.56 per share on Wednesday, Aug. 1, up from $21.16 per share a year prior.

— Camren Skelton

 

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