Medical Properties in Phoenix, South Florida and Chicago Area Sell for $86 Million

Article originally posted on CoStar on February 8, 2024

Two big buyers of healthcare properties have invested $86 million in Phoenix, South Florida and the Chicago area, adding to their run of acquisitions in recent months.

Remedy Medical Properties and Kayne Anderson Real Estate bought the properties from Flagler Healthcare Investments, JLL announced this week. The deal was completed just before the end of 2023, according to the brokerage.

The properties have more than 181,000 square feet combined, according to JLL. They include the Oasis Surgical Hospital at 750 N. 40th St. in Phoenix, Baptist Health City at 10275 and 10383 Hagen Ranch Road in Boynton Beach, Florida, and the Elgin Professional Plaza at 750 Fletcher Drive in Elgin, Illinois.

Miami-based Flagler Healthcare Investments bought the properties for just over $70 million in deals in 2019 and 2020, according to CoStar data and property records.

The higher price for the portfolio stands out during a slowdown in property sales and overall sluggish pricing because of rising interest rates, poor demand in sectors such as traditional offices and other economic factors. Yet medical properties with long-term tenants have remained in relatively high demand, said Mindy Berman, one of the JLL brokers who represented the seller.

“Medical is a preferred asset for investment today because of the durable nature of the tenancy,” Berman told CoStar News. “While sales volume for medical properties is off like other property classes, it is not off as much as the broad index.”

The Phoenix deal is a leasehold interest, meaning the buyers will make ground-lease payments to a separate owner of the land beneath the facility, she said. All three properties have tenants on long-term leases in buildings loaded with medical equipment that would be costly and complicated to move.

Overall occupancy of medical properties nationally is 93%, and it never has fallen below 91.5%, Berman said.

“The location is usually strategic, with the infrastructure in the building likely to remain in place,” Berman said. “There’s a high likelihood of lease renewals.”

The Remedy-Kayne Anderson venture declined to comment.

“This sale aligned with our strategic plan for the investment, and its disposition timeframe was opportune due to achieving the expected returns,” Didier Choukroun, founding partner, president and CEO of Flagler Healthcare Investments, said in a statement to CoStar News.

Late last year, Remedy and Kayne Anderson teamed up to pay $115 million for a specialty hospital in Frisco, Texas, and almost $71 million for a medical center in Oak Brook, Illinois.

Chicago-based Remedy is one of the largest private owners of medical properties in the country, with more than 30 million square feet and 25 offices in 43 states. Los Angeles-based Kayne Anderson has about $15 billion in assets under management. Its real estate investments also include senior housing, off-campus housing, traditional apartments and self-storage.

The seller was represented by JLL brokers Berman, Matt DiCesare and Liam Sorensen.