NexCore Group LP, a national healthcare real estate firm, and Heitman LLC, a multi-national real estate investment management firm, announced today the acquisition of a ±671,811 square foot medical office portfolio in California and Arizona. Dignity Health occupies approximately 33 percent of the portfolio. Dignity is the fifth largest hospital system in the nation, with 39 hospitals in the three states of California, Arizona and Nevada.
“With the resurgence in the Arizona and California real estate markets, and with the continued growth in the healthcare sector, we are excited to manage this portfolio,” says Greg Venn, CEO of NexCore. “We will bring new capital improvements to the project and a new pride of ownership that reflects the quality tenancy in the buildings.”
Strategic Portfolio Acquisition
The portfolio contains 13 medical office buildings — eight of which are located in southern California and five of which are located in Arizona around the Phoenix metropolitan area. Nine of the buildings reside on the campuses of Dignity Health hospitals, making them strategic real estate for the health system.
The medical office portfolio is generally located in high growth markets with a strong payer mix and high demand for medical procedures. Seventy-seven (77) percent of the portfolio is located in markets whose population growth over the next five years is expected to be above the national average with markets for five of the properties seeing double-digit population growth.
“This is a significant portfolio investment, and the resulting buyer was going to be one of Dignity Health’s largest real estate managers,” says Lee Asher, Senior Vice President of CBRE’s U.S. Healthcare Capital who represented the Seller along with Chris Bodnar in the transaction. “NexCore and Heitman were selected not only because we believed their existing relationship with Dignity Health would result in a smooth and seamless transition but also because it was important to select a buyer with extensive experience and expertise in managing physician office space. NexCore’s comprehensive approach to medical asset ownership will undoubtedly benefit Dignity Health and enhance the system’s delivery of outpatient clinical services.”
NexCore-Heitman Joint Venture
With the purchase of the Dignity Health portfolio at $113.7 million, the NexCore-Heitman team has now completed a combined transaction volume of over $490 million.
“This strategic acquisition continues to broaden and strengthen our joint venture relationship with NexCore,” says Brian Pieracci, Senior Vice President at Heitman. “The 13-building portfolio has all of the criteria that our joint venture team looks for when embarking on acquisition and development projects: hospital sponsorship, high-quality facilities, a diverse tenant mix and growing markets with strong demographics.”
NexCore will provide operating and property management services for the portfolio under a long-term contract.
“We believe our team can provide significant value to this portfolio by strategically working with Dignity to attract and retain the physician groups and tenants that will add value to their brand and their positioning in the market,” Mr. Venn adds. “We will strive to maintain the 13 facilities to the highest quality standards to reflect the Dignity brand.”