LaSalle Investment Management Reportedly Buys 500,000-SF, 30-Story Medical Plaza for $405 Million
The Texas Medical Center, the world’s biggest medical complex, may now be home to the most costly U.S. medical office building ever sold.
A LaSalle Financial investment Management fund bought the 500,000-square-foot Memorial Hermann Medical Plaza at 6400 Fannin St., anchored by Memorial Hermann’s 175,000-square-foot lease. Pricing wasn’t formally divulged, however an individual knowledgeable about the transaction told the Wall Street Journal that the Chicago-based financial investment firm paid $405 million. The asset was 99 percent rented at the time of sale, inning accordance with CoStar information.
The medical office complex’s prominence within the Texas Medical Center was a big factor in the reported record-breaking price. With more than 50 million square feet of industrialized medical centers, the Texas Medical Center treats more than 10 million patients each year. The campus is expanded over 1,345 acres and creates more than $25 billion a year, making it the eighth-largest U.S. enterprise zone. The Texas Medical Center is the biggest of its kind because most other leading healthcare property markets have a big portion of their area comprised of research facilities.
The offer is the most recent sign of financiers’ appetite for medical office buildings across the nation. Last year, 97% of health care investors surveyed by CBRE indicated they were most thinking about medical office buildings, rather than other kinds of health care real estate like outpatient ambulatory care facilities or senior real estate. The demand has driven medical office buildings acquisitions up by 34.4 percent to $1.4 billion in the Texas-Oklahoma-Arkansas area in 2017.
The popularity of medical office buildings is based in part on tight supply. Absorption of medical office across the U.S. has outpaced completions of new buildings for the previous 7 years, driving steady decreases in the national job rate.
Financiers also like health care realty as more of America’s infant boomers, the greatest age, enter their 70s. Medical office building occupants are normally less susceptible to changes in reimbursements and policies and as soon as they have actually signed, are far less likely to transfer to a brand-new area, making them interesting structure owners.
Increasing investor self-confidence in medical office buildings has actually driven increased transaction volume that CBRE stated totaled $9.9 billion in 2015 at a 6.8 percent capitalization rate, which is calculated by dividing a residential or commercial properties net operating earnings by the list prices.
It only took 2 months for the highest medical office complex price record to be broken. The previous record was set earlier this year when German bank Commerzbank AG obtained a 25-story, 390,000-square-foot office complex in New york city City, the Langone Tower at 222 E. 41st St., for $332.5 million from Columbia Home Trust, inning accordance with published reports at the time. The residential or commercial property is leased to a single-tenant, NYU Langone Medical Center. On a price-per-square-foot basis, the New york city building was more expensive.
The western U.S. stays ahead of the pack with a typical sale price of $329 per square foot, which is $90 per square foot more than the national average. Seattle, Los Angeles and New York have actually tape-recorded the most medical office complex investment activity among major U.S. cities.
Each market has actually had trades in excess of $1,000 per square foot, with numerous at about $1,500 per square foot and one above $1,750 per square foot. Capitalization rates for well-located and fully rented prime assets stay compressed at around 4.5 percent in these markets that are very expensive to go into, a significant premium over national averages.
To find out more on the sale of the Memorial Hermann Medical Plaza, please see CoStar Comp # 4433363.