With Lenders Bullish on Medical Office Market, Healthcare Realty Trust Snags $550M
- Oct 05, 2009
By: Barbra Murray, Contributing Editor
The medical office market has fared better than most real estate sectors in the midst of the economic crisis, and it appears lenders are taking note. Nashville-based Healthcare Realty Trust Inc. has just entered into a $550 million unsecured revolving credit facility with a group of 16 lenders.
The three-year revolving credit facility is scheduled to mature on Sept. 30, 2012 and replaces HRT’s former $400 million credit facility, which was due in 2010; the financing allowed the REIT to repay in full the approximately $368 million outstanding balance under the former credit facility.
Bank of America, N.A. is the administrative agent on the transaction, while Banc of America Securities L.L.C. and Calyon Securities L.L.C. are serving as joint lead arrangers and joint book runners. The remaining financial institutions involved include JPMorgan Chase Bank, N.A.; Regions Bank; Wachovia Bank; UBS Loan Finance L.L.C.; Barclays Bank PLC; Fifth Third Bank; SunTrust Bank; Bank of Montreal; Bank of Nova Scotia; State Bank of India; Compass Bank; Pinnacle National Bank; the Los Angeles branch of Chang Hwa Commercial Bank Ltd.; and Avenue Bank.
As of the close of 2008, HRT owned a portfolio of 192 properties, 121 of which are medical office assets. The remaining group of 71 properties includes physician clinics, ambulatory care/surgery centers, specialty outpatient facilities, specialty inpatient facilities, and other healthcare property types.
According to a mid-year report by Marcus & Millichap Real Estate Investment Services, “medical office properties continue to garner investor demand by exhibiting considerable resistance to the economic downturn.” The market’s stamina is due to the fact that the healthcare industry remains strong, with the country spending an annual $2 trillion on healthcare; a price tag that is expected to increase to more than $3 million by 2013. Ongoing demand for medical office properties will be driven by the aging baby boomer population and the growing number of people over 55, as well as the healthcare industry’s shift in focus from inpatient care to outpatient care.
The fundamentals are very strong for the medical office property market, and activity among many financial institutions supports the assessment. In September, GE Capital’s Healthcare Financial Services business reported that in the first six months of 2009, it had provided a total of approximately $1 billion in loans for 45 transactions that allowed borrowers to refinance existing debt, finance growth pursuits and support working capital needs.