2A — June 10 - 23, 2016 — M id A tlantic
Real Estate Journal
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MAREJ A dvertising D irectory Barry Isett & Associates.................................... IBC-C Benesch...................................................................21A Berger | Harris. .....................................................21A Berkadia.................................................................IC-A Bussel Realty Corp...................................................1B Capstan Tax Strategies..........................................14C CBRE Griffin Industrial...........................................2C CIRC DE. ................................................................22A Concannon Miller............................................... IBC-C Cooch & Taylor.......................................................23A Cooper Horowitz.......................................................7A CORFAC International...................................... IBC-A CREW NJ................................................................16B Cushman & Wakefield. ............................................7B Deerwood Real Estate Capital.................................6A DesignPoint......................................................... IBC-C Earth Engineering, Inc.. ..........................................4C Environmental Systems.........................................27A Eric M. Doroshow...................................................27A EwingCole...............................................................12C Exchange Solutions, Inc.........................................11A Fowler Companies..................................................27A Gebroe-Hammer Associates.....................................6B Harvey Hanna. .......................................................19A Heller Industrial Parks............................................9B Hillcrest Paving & Excavating..............................27A Hinerfeld Commercial.................................. 27A, IC-C Investors Real Estate Agency................................27A Jackson Cross Partners..........................................21A Kaplin Stewart. ................................................. 3A, 9A Kennedy Funding Financial..................................15A Landmark Commercial Realty. .............................10C Lee & Associates.......................................................7C Marcus & Millichap..................................................3A Mericle.....................................................................15C Meridian Capital Group.......................................BC-B Montgomery McCracken Walker & Rhoads.........8-9C Moonstone Environmental................................. IBC-C NAI Summit............................................................27A NAICIR. ..................................................................11C NorthMarq Capital........................................ 18A, 12B PennCap Properties. ....................................... 27A, 3C PHFA........................................................................ BC Poskanzer Skott Architects....................................13B Principal Commercial Capital Group....................10A Provident Bank.....................................................BC-A Real Property Capital, Inc.......................................8A Redwood Realty Advisors.......................................10B Regal Bank..............................................................13A ROCK Commercial...................................................6C SEBCO Laundry Systems........................................3B Singer Financial Corp............................................16A Subway....................................................................27A The Berger Organization. ......................................11B The Henley Group..................................................12A The Kislak Co.. .........................................................2B TimHaahs. ..............................................................13C Torcon........................................................................3B Traiman Real Estate Auction Co.............................4A WSFS Bank.............................................................21A York Funding LLC. ................................................14A Zimmel Associates....................................................8B
Mid Atlantic R eal E state J ournal Publisher ............................................................................ Linda Christman Publisher ............................................................................... Joe Christman Associate Publisher ................................................................ Steve Kelley Associate Publisher .............................................................Alissa Aronson Associate Publisher ..........................................................Barbara Holyoke Associate Publisher ..............................................................Eric Ballenger Senior Editor/Graphic Artist .................................................Karen Vachon Production Assistant/Graphic Artist ...........................................Julie King Office Manager .................................................................... Joanne Gavaza Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockland, MA 02370 USPS #22-358 | Vol. 28 Issue 11 Subscription rates: $99 - one year, $148 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
Avoiding Market Volatility: Healthcare Innovation Arbitrage Meets Real Estate Barry Didato A Ben Kempenich n interesting opportu- nity is emerging in the midst of the equities market chaos in China, the U.S., and elsewhere. As the healthcare industry evolves, spurred by the Affordable Care Act (ACA) and its em- phasis on making health care more accessible, efficient, and patient-centric, so do the opportunities in health care real estate, especially for those with an inside track to identify investment opportu- nities. Independent private physicians continue to merge and evolve relationships with larger health care providers and to take full advantage of co-location efficiencies that offer benefits for health sys- tems, physician practices and consumers. Underlying all of these shifts is a perpetual and ever-in- creasing need for health care systems to contain cost. One of the best ways that health care systems are seeking to reduce debt and improve operations is to de-lever and untangle their balance sheets by mak- ing better use of their finances that are being earmarked for real estate assets, and the reallocation of some of that capital toward a more strate- gic use of the delivery of care. These trends set the stage for well-positioned groups such as Healthcare Property Advisors (HPA), The Innovation Insti- tute, and their investors to tar- get highly attractive returns on investment in a dynamic and growing asset class: medical office buildings (MOBs). Investor demand for MOBs is soaring. In just the first half of 2015, MOB transaction volumes were $11.7b, more than all of 2014. In its 2015 MOB outlook report, Colliers International predicted that these strong growth trends should continue into the foreseeable future, driven by industry, technol- ogy, and demographic trends that will likely persist for 25+ years. Medical Construction & Design’s most recent Con- struction Report identified a pipeline of $86.7b in medical real estate construction. Inves- tors are attracted to the stable returns offered by this unique asset class. MOB’s embody re- cession-proof tenancy potential
and strong multi-year triple net master leases backed by bond-graded health systems. It’s a win/win for all parties. One avenue that accredited investors can use to capital- ize on the MOB market is the HPA Growth Fund, af- filiated with The Innovation Institute, which is structured exclusively around mission- critical MOBs acquired via their proprietary pipeline of vetted deal flow. The Fund’s action plan addresses defi- ciencies in the market, offer- ing investors an inside track that leverages unique rela- tionships and access within the healthcare industry. The Fund’s investment philosophy is to “optimize risk-adjusted returns by investing in all as- pects of the capital structure and matching investment to strategic value.” To further amplify returns, investors in the Fund can take advantage of the power of IRS 1031 ex- changes that allow the general partner to roll over gains into new acquisitions and defer taxes, thus yielding a very at- tractive and stable return on their investment. The HPA Growth Fund, and its unique ability to source opportunities in the MOB market, is backed by the Inno- vation Institute’s portfolio of healthcare service companies.
The Fund is managed by HPA, a specialty firm uniquely ca- pable of acquiring and man- aging MOBs for the Fund. The Fund, which is capped at USD $1 billion, already invested its initial assets of approximately $140 million (including investments from The Innovation Institute and other institutional investors), in four top-tier MOBs in Mis- sion Viejo, California. HPA, The Institute and their insti- tutional partners are slated to grow this portfolio as the Fund welcomes additional investors, partners, and real estate opportunities. For all the talk of pain being expe- rienced within health care today, HPA’s novel approach shows investors that change can be good! Barry Didato is Chief In- vestment Officer of The In- novation Institute, a compa- ny structured to leverage its 400+ aligned personnel and strategic partners to sup- port healthcare innovators and help health systems be a positive force to meet the needs of a rapidly changing global healthcare industry. Ben Kempenich joined The Innovation Institute in 2016. He is a recent MBA graduate of UC Irvine’s Paul Merage School of Business. n
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