Healthcare Property Portfolio Commands Healthy Price

In a $161.6 million deal, Grubb & Ellis Healthcare REIT, Inc. will acquire a 16-building health care property portfolio in metropolitan Greenville, S.C., from Greenville Hospital System (GHS). GHS will lease back the portions of the 855,000 square foot portfolio of medical office and health care-related facilities it currently occupies.

The facilities are fully occupied, with GHS operating in 83 percent of the portfolio, and medical specialists practicing in 17 percent under long-term lease agreements. As part of the deal, GHS will continue to occupy its space under 10- and 15-year leases.

Grubb & Ellis Healthcare is planning a long-term association with GHS because of its significant market share and dominance as a provider, and thinks it will be in a position to help GHS deliver new developments as they need them. The group of health care assets was openly marketed, but the inhospitable credit markets limited the pool of prospective investors to those who can buy with cash, which included Grubb & Ellis Healthcare.

More major portfolio purchases by Grubb & Ellis Healthcare, which will be renamed Healthcare Trust of America, Inc. in August, are likely on the horizon as it looks at larger metropolitan areas. Competition is unlikely to go away anytime soon, however, given that the medical office property sector currently is one of the more successful in commercial real estate.

The current average vacancy rate for medical office properties is 11.6 percent, compared to 15.2 percent for traditional office properties, according to Marcus & Millichap Real Estate Investment Services' recent “Healthcare Reform Outlook” report.