CBRE Global Buys 25 Medical Office Buildings

The 1.4 million-square-foot, 10-state portfolio will be operated by the seller, a joint venture of Kayne Anderson Real Estate Advisors and MBRE Healthcare.

Terrace Park in the Atlanta
Terrace Park in the Atlanta

CBRE Global Investment Partners has acquired a 95 percent interest in a 10-state, 25-building medical office portfolio from Kayne Anderson Real Estate Advisors and MB Real Estate Healthcare.

“We’ve been investing in what I’ll call the alternative sectors—medical office, student housing, senior housing, storage—for the past few years, and as we’ve gotten to know them better, we’ve continued to like the supply and demand fundamentals,” Matt Tepper, CBRE Global Investors’ managing director, told Commercial Property Executive. “With medical office specifically, with more people requiring health care, it’s a sector we certainly wanted to increase our exposure to.”

The portfolio consists of a total of 1.4 million square feet of space and a 150,000-square-foot development project.

Attractive mix

“We thought this portfolio had a really unique mix of both alt and on-campus apartments, with a really strong tenant base, that included both regional and national healthcare systems, as well as a lot of specialty providers,” Tepper said. “Overall, we thought the mix of this portfolio was really attractive.”

Kayne Anderson Real Estate Advisors and MBRE Healthcare will continue to operate and manage the portfolio, a big key for CBRE Global Investors in the transaction.

The buildings are heavily concentrated in Atlanta and Chicago, but overall represent a broad geographic exposure with a mix of both off-campus and on/near-campus locations.

“We really like the tenancy we have in both of those markets. They are both markets with large populations,” Tepper said.

At the time of the sale, the portfolio was nearly 95 percent occupied, with key tenants including both national and regional healthcare systems along with high-quality specialists.

Diversifying income sources

“As we get later in the cycle and think about how we invest capital at this point, something that was interesting to us was diversifying our income sources,” Tepper said. “We think the niche selectors are interesting and provide real diversification in that the demand that underpins the income is less correlated than what underpins the income in some of the other areas.”

CBRE Global Investment Partners will work with its operating partner to do some minor repositioning of some of the assets, such as upgrading lobbies, improving elevator systems, redoing parking lots and other things that will improve the patient experience.