HEALTHCARE REAL ESTATE ACQUISITION FINANCING PREFERRED TERMS FOR TARGET TENANTS
ESSENTIAL HEALTHCARE TENANTS
Healthcare Essential Tenants remain resilient despite investor concerns surrounding the Covid-19 pandemic for the overall net lease sector, the net lease medical sector saw an uptick in transaction volume through the third quarter of 2020. When compared to 2019, transaction volume in the third quarter for the net lease medical sector increased by approximately 6%. Investor demand increased as medical related assets are considered essential.
The net lease medical sector is priced at a significant discount to the overall net lease sector. In the third quarter, net lease medical properties were priced at a 28-basis point discount to the overall net lease sector. However, cap rates for properties with investment grade-rated medical tenants commanded a significant premium. In the third quarter of 2020, investment-grade back tenants were priced at a 57-basis point premium (5.93% cap rate) over the overall net lease sector.
Both private and institutional investors continue to seek investment opportunities within the single-tenant medical sector. Investment-grade medical tenants such as hospital-backed systems and Fresenius typically generate lower cap rates due to the increased demand from private and 1031 investors. However, as new brands emerge from the “medtail” sector, private investors have widened their acquisition criteria to include urgent care groups as higher yields can be achieved.
The single tenant net lease medical sector will remain active as investors are attracted to the long-term outlook of the healthcare sector and the increased need for conveniently located healthcare. As the impact of Covid-19 continues to evolve in the overall net lease sector, e-commerce resistant and essential based businesses including the medical sector will be the biggest beneficiaries. Demand from both private/1031 exchange buyers as well as institutional investors will continue to target this asset class.
FORTUNE 500 FIRMS AS YOUR TENANT
Investment Highlights:
COVID-19 & Internet Resistant Tenant
- Tenant provides an Essential Service and has remained open for business and paying rent.
- Davita is resistant to ecommerce, like Amazon, providing long term security to any landlord.
Long Term Lease In Place With Over 10 Years Remaining
- The primary term of the existing lease with Davita expires 8/25/2030 with two five-year options to extend
Fixed Increases Throughout the Primary Term and Options
- Davita has fixed 10% increases every 5 years through the primary term and options
Passive NNN Investment With Minimal Landlord Responsibilities
- Landlord shall only be responsible for repairs and maintenance to the structure of the building.
- Tenant shall reimburse Landlord for any repairs or maintenance to the roof, parking areas and HVAC.
Strong Corporate Tenant in Davita Inc. With A $4.04B Net Worth
- Fortune 500 Company
- $11.4 billion in revenues
- 231,700 patients at 2,971 outpatient dialysis centers as of 6/30/2019
Warren Buffett’s Berkshire Hathaway is Davita Inc.’s Largest Shareholder
- Berkshire owns approximately 38.5 million shares of Davita Inc. stock, making them the largest shareholder with a 24% stake
Strong Investment Fundamentals
- Long-term leases in place, good real estate and solid corporate tenant guarantor.
- Ideal 1031 exchange property.
HEALTHCARE MEDICAL OFFICES
Investment Highlights:
COVID-19 & Internet Resistant Tenant
- Tenant provides an Essential Service and has remained open for business and paying rent.
- Davita is resistant to ecommerce, like Amazon, providing long term security to any landlord.
Long Term Lease In Place With Over 10 Years Remaining
- The primary term of the existing lease with Davita expires 8/25/2030 with two five-year options to extend
Fixed Increases Throughout the Primary Term and Options
- Davita has fixed 10% increases every 5 years through the primary term and options
Passive NNN Investment With Minimal Landlord Responsibilities
- Landlord shall only be responsible for repairs and maintenance to the structure of the building.
- Tenant shall reimburse Landlord for any repairs or maintenance to the roof, parking areas and HVAC.
Strong Corporate Tenant in Davita Inc. With A $4.04B Net Worth
- Fortune 500 Company
- $11.4 billion in revenues
- 231,700 patients at 2,971 outpatient dialysis centers as of 6/30/2019
Warren Buffett’s Berkshire Hathaway is Davita Inc.’s Largest Shareholder
- Berkshire owns approximately 38.5 million shares of Davita Inc. stock, making them the largest shareholder with a 24% stake
Strong Investment Fundamentals
- Long-term leases in place, good real estate and solid corporate tenant guarantor.
- Ideal 1031 exchange property.
HEALTHCARE MEDICAL OFFICES
Investment Highlights:
COVID-19 & Internet Resistant Tenant
- Tenant provides an Essential Service and has remained open for business and paying rent.
- Davita is resistant to ecommerce, like Amazon, providing long term security to any landlord.
Long Term Lease In Place With Over 10 Years Remaining
- The primary term of the existing lease with Davita expires 8/25/2030 with two five-year options to extend
Fixed Increases Throughout the Primary Term and Options
- Davita has fixed 10% increases every 5 years through the primary term and options
Passive NNN Investment With Minimal Landlord Responsibilities
- Landlord shall only be responsible for repairs and maintenance to the structure of the building.
- Tenant shall reimburse Landlord for any repairs or maintenance to the roof, parking areas and HVAC.
Strong Corporate Tenant in Davita Inc. With A $4.04B Net Worth
- Fortune 500 Company
- $11.4 billion in revenues
- 231,700 patients at 2,971 outpatient dialysis centers as of 6/30/2019
Warren Buffett’s Berkshire Hathaway is Davita Inc.’s Largest Shareholder
- Berkshire owns approximately 38.5 million shares of Davita Inc. stock, making them the largest shareholder with a 24% stake
Strong Investment Fundamentals
- Long-term leases in place, good real estate and solid corporate tenant guarantor.
- Ideal 1031 exchange property.
