Healthcare Realty Trust to Buy Medical Office Portfolio in Atlanta for $612.5M
ATLANTA — Healthcare Realty Trust Inc. (NYSE: HR), a healthcare REIT based in Nashville, has agreed to purchase 15 medical office buildings located in the metro Atlanta area from Meadows & Ohly for $612.5 million. More than 85 percent of the portfolio is located on hospital campuses, and all of the assets are associated with three leading health systems in Atlanta.
The portfolio spans 1.3 million square feet and was 96.2 percent leased at the time of the deal announcement. The assets have an average building age of 9.7 years. The portfolio is expected to produce net operating income of $29.9 million in 2018.
The portfolio includes nine properties totaling 772,400 square feet associated with WellStar Health System, including a 165,400-square-foot, off-campus facility currently under construction. Set to open in September, the asset is fully preleased to WellStar. The other eight facilities are situated on three hospital campuses and are nearly 60 percent leased to WellStar, which operates 11 hospitals and has a 21 percent market share, making it the leading health system in the Atlanta MSA.
Three medical office buildings totaling 276,700 square feet are affiliated with Piedmont Healthcare, the third-largest healthcare system in the Atlanta market with 14.5 percent market share. Two of the assets are situated on separate hospital campuses, while the third building is off-campus. The off-campus asset spans nearly 20,000 square feet and is fully leased to Piedmont for a remaining 12.7 years.
Three medical office buildings totaling 269,400 square feet, or 20.4 percent of the portfolio, are located on two hospital campuses and are 32.3 percent leased to Gwinnett Medical Center. Gwinnett has publicly announced plans to merge with Northside Hospital, a health system that operates three hospitals in the market. The combined systems will become the second largest in the Atlanta MSA with roughly 18.4 percent market share.
Within the portfolio, the properties are leased to a variety of specialties, such as obstetrics/gynecology at 13 percent, oncology at 12 percent, cardiology at 11 percent and orthopedics at 9 percent.
More than half of the multi-tenant, occupied square footage in the portfolio is up for renewal within the first five years of ownership, which enhances the potential for continued rent growth.
Healthcare Realty Trust expects to acquire the portfolio in multiple closings during the third and fourth quarters. The company integrates owning, leasing, managing, financing, developing, and redeveloping real estate properties associated primarily with the delivery of outpatient healthcare services.
As of June 30, the REIT had gross investments of approximately $3.6 billion in 197 real estate properties in 26 states totaling approximately 14.5 million square feet. Additionally, the company provided leasing and property management services to approximately 10.9 million square feet nationwide.
Healthcare Realty’s stock price closed on Wednesday, Aug. 9 at $31.80 per share, down from $35.94 per share at this time last year.
Atlanta-based Meadows & Ohly is a healthcare real estate advisory, management and development firm with regional offices in Charlotte and Jacksonville. The firm has delivered more than 6 million square feet of outpatient and physician office space.
— John Nelson