Harrison Street Awards C&W 1.5 MSF, $500M Med Office Portfolio
- Feb 14, 2014
With the last sales worth $193.6 million completed, Harrison Street Real Estate Capital and Washington Real Estate Investment Trust have finished their $500.7 million¸1.5 million-square-foot medical office deal. It was the largest medical office building transaction of 2013 and included 22 buildings in the Washington, D.C., metropolitan area.
Chicago-based Harrison Street said this week it has chosen Cushman & Wakefield as the exclusive property management contract for the portfolio, which has properties in Washington, D.C, Northern Virginia, Southern Maryland and Baltimore. The portfolio represents 20 percent of the institutional-grade medical office properties in the area, according to Cushman & Wakefield.
“With the focus on healthcare costs being what it is, I think there is a heightened awareness of the need to reduce operating costs where possible. That’s clearly one of the drivers for us as we get involved in managing these assets,” Scott Mason, leader of C&W’s Healthcare Practice Group, said in a news release. “Every one of these markets has a unique challenge. With all the chaos in health care today, it is vitally important to deliver a superior level of service at the lowest possible cost.”
C&W HPG leaders Jeff Piehl (Valuation) and Mark Johnson (Property Management) will offer health care real estate expertise on the project. Local property management services will be coordinated by Director Deborah Santano, General Manager Dick Fetter and Senior Chief Engineer Don Bauman. The assignment also includes leasing advisory services for half the portfolio.
Brian Mutchler, Harrison Street senior vice president, said there were several factors which led the firm to choose Cushman & Wakefield for the management and partial leasing assignment.
“Chief among them was Cushman & Wakefield’s breadth and depth of knowledge of the needs of today’s health care real estate user,” Mutchler said in the release. “Having access to Cushman’s collective knowledge in their prior dealings with health care users, from small, locally-based physicians’ groups to some of the biggest hospital systems in the country, is paramount given that this large and diverse MOB portfolio has almost every type of health care tenancy imaginable.”
The most recent properties to close were Woodburn Medical Park I and II in Annandale, Va., and Prosperity I, II and III in Merrifield, Va. Harrison Street paid WRIT $193.6 million for those properties, or $453 per square foot, according to a WRIT news release. The first part of the transaction worth $307.2 million, closed in November. That transaction included the sale of office building totaling 877,000 square feet¸ two office assets featuring significant medical office tenancy and a parcel of land used as overflow parking at Alexandria Professional Center.
It was the largest transaction in WRIT’s 53-year history. The Rockville, Md.,-based REIT is focusing on office, residential and retail assets. It owns 51 properties totaling approximately 7 million square feet of commercial space and 2,675 multi-family units, and land for development.
“With the sale completed, we look forward to strategically repositioning the portfolio even further,” Paul McDermott, WRIT president & CEO, said in a prepared statement.
The WRIT deal isn’t Harrison Street’s only medical acquisition. Earlier in January, Harrison Street teamed up with a joint venture partner, The Sanders Trust L.L.C. of Birmingham, Ala., and bought two Massachusetts rehabilitation hospitals for $90 million from Senior Housing Properties Trust of Newton, Mass. The two properties are New England Rehabilitation Hospital with 210 beds in Woburn, Mass., and Braintree Rehabilitation Hospital with 187 beds in Braintree, Mass.
Harrison Street, has about $6 billion of assets under management. Last year, the firm acquired more than $2 billion in new investments in the self-storage, student housing, senior housing and medical office segments.