Healthcare Realty’s Post

As sponsors continue to increase their focus on healthcare in general, and on healthcare providers in particular, we are seeing increased conflict and challenges in the relationship between the sponsor and physicians. Depending on the specific model in place (friendly shareholder, physician practice management, etc...) and the contractual relationship (employed physician, JV partner, board member, etc.), the challenges that can arise may be different but often can be mitigated with work from the sponsor early in the relationship. The key areas that we suggest focusing on are: How to motivate an entrepreneurial vs a “happy to be employed” physician – In most provider groups there is often a handful of physicians with an entrepreneurial streak.  It’s always important to identify those early in the process (personality scorecards can be helpful) and ensure that they have leadership roles, the ability to influence strategy or other roles where they can feel fulfilled. How to keep physicians happy if the deal isn’t performing as planned – In those situations where physician(s) rolled equity or have their compensation dependent on the overall performance of the asset, it’s important to be open with them about the performance misses and the plans to correct the issue.  The worst thing is to exacerbate the miss, by physicians electing to leave or not focus on revenue drivers. Need for Joint Practice Management Boards / Management Team touchpoints – Post transaction, the sharing of information often falls by the wayside, making members of the physician team feel disconnected from the business (and more likely to leave or not be motivated).  We always urge a communication schedule; including in-person meetings and standard reporting to allow the physician team to understand how the organization is performing. Do not over promise what physicians will see post transaction – Often new sponsors will do a “road show” with the physician providers in a business either pre or post-acquisition.  Too often these meetings result in the physician(s) feeling that the sponsor made promises; to drive value, spend on capex, hire additional staff, etc…  We would suggest working off a slide deck when highlighting your expectations for the relationship at these introductory meetings, creating a written record and alignment on both sides of the discussion. How to discuss the difference between EBITDA and compensation –  Post transaction, Compensation definitions often changes.  We suggest sponsors at first-time investor-owned assets spend a significant time at acquisition discussing this change, walking through various examples, and ensuring all physicians understand the change that will be occurring. To find out more about how Allenhurst Advisors can help navigate communication and relationships with physicians when a provider becomes investor-backed, please visit us at www.allenhurstadvisors.com or reach out to us [email protected]

At Healthcare Realty, we make it easy for our tenants to expand into new markets! Here’s one recent example. Infusion for Health – a national infusion treatment center that has been a tenant for several years in one of our buildings in Laguna Hills, California – is in the process of scaling up their practice, adding new locations in other cities. They set an aggressive timetable for expansion. But negotiating multiple new leases with different building owners all at once can be a cumbersome and time-consuming process, full of stops and starts. Not every landlord is equipped to move at the fast pace the tenant needed. Infusion for Health’s solution was to build upon their well-established relationship with Healthcare Realty. Our ability to offer one-time lease negotiation for suites in multiple locations, with streamlined contracts and speedy turnaround, made it easy and efficient for them to accomplish their expansion goals. Over the past twelve months, we’ve signed new leases with Infusion for Health in FIVE more of our buildings – one in St. Louis, Missouri, and four in California (Oakland, West Hills, Pasadena, and Fountain Valley). All with a landlord the tenant already knows and trusts to provide unmatched tenant service and support. And when they’re ready to expand into additional markets, Healthcare Realty is ready to help with that, too – replicating Infusion for Health’s existing leases to quickly get them into new suites in our medical buildings in major markets across 35 states. Our Directors of Leasing Kent Heller and James McClintock greatly value our partnerships with the broker representatives who worked with us to make this win-win solution happen – Angie Weber and Dana Nialis of CBRE, Sid Ewing with Colliers, Jay Travis and Ben Albers, SIOR with Avison Young, and Whitney Allen with CBRE, as well as landlord reps Sonny O'Drobinak with TRI Commercial and Aaron Phillips, John Wadsworth, Jacob Mumper, and Kevin Fenenbock with Colliers. Our thanks to Magali Vasquez and Dan McCarty and the rest of the Infusion for Health team for the fantastic collaboration. Healthcare Realty is proud to grow our relationship and welcome your new facilities into our buildings! #MedicalTenants #EasyExpansion #SpeedToLease #GrowWithUs

🚀✨ Exciting Update! ✨🚀 Hey LinkedIn community! I’m thrilled to share that my profile has a fresh new look! 🎉 I’ve just updated my banner, and I’d love for you to check it out. This new design represents Aspen Hill Rehabilitation & Healthcare Center's newest achievement and I couldn’t be more excited to showcase it. 🔍 Dive in and let me know what you think! Thanks for your continued support and stay tuned for more updates! 🚀 #NewBanner #LinkedInUpdate #NursingHomes

The second quarter showed promise for Raleigh-Durham medical office. Medical office sales bounced back in Q2 2024, driven by institutional portfolio sales and strong demand from private investors. The most notable transaction was Highwoods Properties selling Rexwoods Center for $62.5 million after nearly 30 years of ownership. Despite high interest rates, easing inflation and a softening labor market are fueling optimism for a more favorable interest rate environment, which could boost investment activity moving forward. View the Raleigh-Durham Market Vitals Report here: https://lnkd.in/enjmnqf7 #MedicalOffice #CommercialRealEstate #InvestmentTrends #MarketUpdate #RaleighDurham #CapitalMarkets #MedicalOfficeInvestments #MedicalOutPatient #CRE Janet Clayton, Office and Medical Real Estate Advisor Blake Thomas

Although one of the shorter annual conferences, #BOMAmedical always packs a lot of great information in a short period of time- as well as some of the best networking around! Always enjoy connecting with hometown compadres including Meighan Williams, Michael Arvin, Kenneth Henry Angel Benschneider Kyle Marden - while expanding connections with organizations nationwide. Insightful sessions help us weed through the standard industry buzz and on to details that drive solutions and understanding of what healthcare systems and medical building owners are focused on. One in particular brought C-Suite leadership together to discuss real estate strategies being implementing, from prioritizing capital market decisions to developing strategic partnerships. The panel, Navigating Healthcare Real Estate in the New Normal, brought together Travis Messina Andrew Haslam Scott Brinker Mike Conn and Kerrie Christensen to share solutions, critical thinking perspectives and illustrate ways strategic partners can support and partner with health systems to bring much needed space to the market. Another session that provided valuable takeaways focused on strategies to leverage core and non-core assets. This is coming up more and more as institutions look to increase reimbursements and revenue. Joe Fogarty Angie Weber Ashley Krueger Brannan Knott John Fard, PhD discussed Outpatient facility growth- and it’s changing delivery model. Many institutions are focusing on ambulatory care, and looking at how to compete based on the market response. One common theme- #flexibility and operational #efficiencies, leveraging assets long term, co-locating service lines and planning for future growth. Efficiency and quality of the spaces is part of the business plan. Not everyone stays to the very end of these conferences. In this case staying had a major payoff with one of the most valuable sessions I heard: Active shooter Aftermath- how to Rebuild. I hope never to be anywhere near an active shooter situation, but having experts who’ve been through it and share their insights on what to do- and not do- from a business perspective in the aftermath of an incident was invaluable. It’s so important to rebuild a sense of #security and #community. Details matter. Thank you Alisa Childers Peters Mark Dukes Nelson Price, CHPA, Veteran Orlando Ojeda.   Conferences aren’t easy to put together so I applaud everyone involved. 👏. #healthcare #mob #development #plantodayfortomorrow Devenney Group Ltd., Architects

Friends – On behalf of Joel Swider and myself, below is our weekly health care real estate briefing. Links to the articles can be found in the first comment. 1. Healthpeak Properties, Inc. and Physicians Realty Trust (NYSE: DOC) closed a $21B merger. The combined company oversees a 52M-sf portfolio of primarily medical outpatient and life science assets in high-growth markets. 2. A recent NEJM Catalyst survey of clinicians and health care executives found that 61% intend to renovate existing health care buildings in 2024, and more than half plan to construct new buildings. The top reasons are to increase capacity, improve patient access and optimize efficiency. 3. CBRE published its 2024 U.S. Investor Intentions Survey. Among the findings, more than half of investors plan to buy more assets in 2024 than in 2023, investors continue to favor Sun Belt cities, high-growth secondary markets and some large East Coast markets for investment in 2024. 4. Becker's Healthcare indicated that Ascension has improved year-over-year operating income for the past two quarters, and a major part of its financial recovery strategy involves monetizing assets, including recent sales of Gulf Coast Health System’s (AL) assets, a sale of Our Lady of Lourdes Memorial Hospital System (NY), a planned sale of Via Christi Hospital (KS) and various other sales and joint ventures in the works. 5. On its latest earnings call, Community Health Systems (TN) said it is evaluating potential sales of over $1B of hospital assets, including a pending sale of two NC hospitals to Novant Health, which has been held up pending an FTC challenge. 6. A West Virginia House of Representatives committee voted to eliminate health care certificate of need (“CON”) in the state, other than for hospice care homes. Currently, all health care providers, unless otherwise exempt, must obtain a CON before adding or expanding health care services or making certain acquisitions above dollar thresholds. 7. Newmark published its 2023 Medical Outpatient Building Sector Year in Review. Among the data, commercial real estate debt origination decreased 44% across all major property types, construction cost escalations slowed throughout the year, sector investment declined 48% and cap rates for MOBs averaged 5.85%. 8. Modern Healthcare reported that birthing center operators are encountering resistance from CON laws and hospital competitors in several states. 9. University of California, Irvine Health plans to spend $975 million to acquire four hospitals from Tenet Healthcare. The acquisition, which is expected to be completed this spring pending regulatory approvals, would triple UCI Health’s licensed bed count to about 1,317. 10. University of Florida Health broke ground on a new 42.5-acre health and wellness campus west of St. Augustine, FL. The project is expected to cost over $1B and will ultimately include 150 licensed beds, as well as expansions of a variety of other services.

If you are going to be at RISE Member Engagement & Experience Symposium you won't want to miss this Linkwell Health session! Learn how to make the most of new CMS guidelines to deepen your member relationships. #medicareadvantage #memberengagement

An example of the strategies adopted by GFH Partners Ltd. In collaboration with #BigSkyMedical to target office assets suitable and capable of being converted to medical offices. An area where value add returns are generated in a stable and generally core to core + sector. #realestate #medicaloffice

"Health Realty Launches Two Durham MOBs as Independent Entities" Read the full article below..

With hundreds of competing priorities, #hospitalexecutive teams must focus on something they that they know they can spend time on and get real results from. An intense focus on improving length of stay gives hospitals a significant advantage in financial performance. In a new blog, Ken Kaufman looks at the ever-present need to lower length of stay, which is a prime candidate for a no-regrets strategy. A scenario developed by some of his colleagues demonstrates why an intense focus on improving length of stay has always been a winner. #healthcaremanagement https://lnkd.in/gQC54cvj