Orlando-area medical offices sold as part of $2.75B Duke Realty - HTA deal

A trio of medical office buildings across Orange and Osceola counties sold in recent days for a combined $94 million as part of Healthcare Trust of America's acquisition of the entire Duke Realty MOB portfolio.

The Arizona-based, publicly-traded REIT announced the $2.75 billion deal in early May. The portfolio includes a total of 78 medical office buildings (MOBs) containing 6.1 million square feet of leasable space, and it makes HTA the largest owner and operator of MOBs in the United States.

The portfolio also includes two development land parcels totaling approximately 17 acres. The acquisition is expected to close in stages through the second and third quarters of 2017, Reuters reported in early May.

In Central Florida, the assets involved in the deal are all MOBs affiliated with Florida Hospital. 

Florida Hospital Celebration Health's associated office building sold for $36 million. The office building on Florida Hospital Kissimmee's campus sold for $33 million, and the MOB adjacent to Florida Hospital East Orlando sold for $25 million.

HTA CEO Scott Peters called the acquisition a phenomenal opportunity because it allowed the REIT to condense five years' worth of transactions into one fell swoop. In a video interview posted on the company website, Peters said that 85 percent of the Duke assets were located in markets where HTA already has a presence.

"We've been talking about core critical real estate -- getting size and depth in critical mass in key markets that we think are gateway markets," he said.

He said the REIT focuses on assets that are affiliated with academic institutions and strong-performing medical systems, and in locations with strong job growth. 

Peters said the Duke portfolio had a 94 percent occupancy rate and average 3 percent same-store growth year over year. The cap rate on the sale is between 5 and 5.25, and over time he expects them to approach the 4 range, making them comparable to traditional Class A office space. 

"MOBs have such strong fundamentals," Peters said. "Cap rates for MOBs continue to come down because of the stability of the earnings, the credit-worthiness of the tenants and the strong occupancy." 

Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407)420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

Copyright © 2018, GrowthSpotter
60°