REIT Joins List of Diversified Investment Trusts Paring Down Assets to Focus On Core Holdings
Washington REIT (NYSE: WRE
) is exiting the medical office business, contracting to sell its MOB portfolio along with two office buildings in the greater Washington, D.C. area in four separate agreements to a single buyer for a combined $500.75M, or $329 per square foot.
WRIT, a diversified REIT which is paring its portfolio to refocus on its core office, apartment and retail assets, had been marketing the properties -- described as the largest portfolio of medical office buildings in the D.C. market -- since early this year.
"Over the past decade, we have methodically grown our medical office portfolio into becoming one of the largest landlords of institutional quality medical office properties in the Washington, DC metro area," said George F. "Skip" McKenzie, president and CEO of WRIT. "With the completion of the medical office portfolio sale, we will be successfully exiting this business line, which has been extremely profitable for us over the past decade."
The aging baby boomers population, combined with implementation of the Affordable Care Act, which will bring health insurance for nearly 30 million more Americans, is expected to increase demand for medical office space
The MOB sector continues as one of the most sought-after product types in CRE following a record-setting pace for medical office building
and portfolio sales in 2012. According to research by Jones Lang LaSalle’s Healthcare Capital Markets practice, more than 120 medical office building properties valued in excess of $1.8 billion were sold in the first half of 2013, while seven portfolios have been on the market or closed with a total estimated value of $1.7 billion.
The vigorous pace of sales activity is showing no real signs of a slowdown. JLL predicts that year-end 2013 volumes for property and portfolio sales should meet or exceed 2012 levels.
In another large recent deal, Healthcare Trust of America, Inc. (NYSE: HTA
) picked up a six-building on-campus MOB portfolio in Southern Florida for $62.9 million from Behringer Harvard Opportunity REIT II, Inc. and AW Property Co.
"The demand from doctors, clinics, labs and rehab providers is ‘crazy to ignore,'“according to Urban Land Institute and PricewaterhouseCooper in 2013 Emerging Trends in Real Estate report. "Landlords should not have problems leasing space anywhere near hospital centers and medical complexes."
The WRIT portfolio totals 1.5 million square feet, including 17 medical office assets and two suburban office buildings, 6565 Arlington Blvd. and Woodholme Center, plus a land parcel in Alexandria, VA used as parking for one of the MOBs. All of the assets are located near major medical centers such as Inova Fairfax Hospital, Shady Grove Adventist Hospital and George Washington Hospital, or near affluent communities and urban centers.
The first two transactions are expected to close Nov. 12, and outside closing date for the second two transactions is Jan. 31, 2014.
WRIT declined to disclose the buyer's identity, although local media outlets named Chicago private-equity firm Harrison Street Real Estate Capital LLC as the buyer.
REITs that own diverse holdings across different product types and geographies are becoming a dying breed, selling portions of their portfolios to focus on other segments that play to their management strengths.
Besides WRIT, such REITs as Kimco Realty Corp., Weingarten Realty Investors and Duke Realty Corp. have all divested non-core properties and recycled capital in recent years.