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Q&A: CBRE’s Shane Seitz Sees New Funds Seeking Healthcare RE

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Connect Healthcare is slated for October 29 and 30 at The Resort at Pelican Hill in Newport Beach, CA. Follow this link for more information and to register for the conference.

Earlier this year, Shane Seitz joined CBRE’s U.S. Healthcare Capital Markets team from Ventas. As a senior vice president, he works with a wide range of investors, so Connect Media asked for his insights into what’s driving demand for healthcare properties and who has money to spend in this sector. Seitz is participating as a panelist at Connect Healthcare next week.

Q: What group of investors have the biggest appetite for healthcare real estate today? Who’s the most active?
A: We’re seeing publicly-traded healthcare REITs, non-traded REITs, institutional and foreign capital, and private capital actively invest in medical office buildings in today’s market. In 2018, the most active group has been institutional capital, who is typically investing on behalf of pension funds and foreign capital. My team (myself, Chris Bodnar, and Lee Asher) has had a number of exploratory calls with groups in 2018. Institutional capital focused on other sectors are starting to raise funds to focus on medical office buildings, and offer their existing investors an entry into the healthcare space. In addition, we’re having conversations with groups that have historically invested with institutional capital through the fund model that are now looking to make direct investments, which is a continuing evolution of our space.

Q: What type of healthcare real estate are investors most interested in right now? Why?
A: Healthcare real estate investors continue to be most interested in medical office buildings, including opportunities in development, value add, core plus and core properties. Medical office provides more stability from a tenancy perspective. Tenants renew their leases at a much higher percentage than other real estate asset types like traditional office or retail. Additionally, the Silver Tsunami of Baby Boomers is expected to outnumber youth for the first time in U.S. history by 2035, according to the U.S. Census Bureau. This older population will use more healthcare than the younger population, and as the migration of healthcare delivery has moved from inpatient to outpatient over the years, MOBs are the preferred location to provide these services.

Q: How would you compare investor demand currently versus 12 months ago?
A: Investor demand is higher than it was 12 months ago, as we continue to see new capital looking to and entering this space. The volume of transactions in 2018 may end up being lower than 2017, it remains to be seen if several portfolios close before year end, but the demand and interest from groups has increased. One group that wasn’t nearly as active in 2018 were the publicly-traded healthcare REITs, which was caused by the disturbance in their cost of capital throughout the year. In years past they were trading at premiums, which encouraged them to aggressively add assets to their portfolios. As this market continues to mature, we would expect to continue see more capital sources enter this space and function similarly to other real estate sectors.

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