Healthcare REIT Acquires CHI Medical Office Facilities for $324M

Physicians Realty Trust shelled out $324 million to acquire 26 medical office facilities.

By Keith Loria, Contributing Editor

John Thomas, Physicians Realty Trust
John Thomas, Physicians Realty Trust

MilwaukeePhysicians Realty Trust has acquired the first tranche of its previously announced pending purchase of medical office facilities from Catholic Health Initiatives for $324 million.

The first tranche includes 26 medical office facilities, totaling 1,390,646 rentable square feet, which are 90.4 percent occupied, with 75 percent of the space leased by CHI affiliated hospitals and physicians.

“We focus our investment efforts on high quality healthcare providers who seek a real estate partner to help them optimize their clinical delivery,” John T. Thomas, Physicians Realty Trust CEO, told Commercial Property Executive. “Chi is particularly appealing due to the markets they serve, like Seattle and Louisville, and their faith based mission. CHI has been growing rapidly, and we expect we will have the opportunity to grow even more with them through our relationship.”

Catholic Health Initiatives is currently the fifth largest non-profit health system in the U.S., with more than 103 hospitals, 3,950 employed affiliated physicians, and 95,000 employees.

According to Thomas, Physicians Realty Trust is still working to acquire the remaining 25 mission-critical medical office buildings leased primarily to CHI’s affiliated hospitals in 10 markets, and is waiting on CHI getting consent from the Vatican for the sale. Except for one project that is currently under construction, the closing on the remainder of the portfolio is expected to occur by the end of the second quarter.

“Medical office is among the most attractive real estate and investment opportunities in any economic cycle, but especially right now,” Thomas said. “CHI anchored medical office buildings provide to us and our shareholders long-term and resilient cash flows in a high growth industry—U.S. healthcare delivery. The CHI investment and relationship is a perfect fit to our thesis and long-term strategy.”

Physicians Realty Trust has committed more than $30 million for near term CapEx investment in the facilities and expect to invest even more as it works with CHI and the tenants to optimize the care delivery space.