Posts by Rob Schick
901 Conner Street - Noblesville, IN
- Outstanding Location on the square in Noblesville
- Unique High Ceilings
- Complete building renovation (windows, doors, HVAC, plumbing, electrical)
4,800 SF - Divisible to minimum 500 SF
Click Here to see Images of Property
For More information Please Contact Rob Schick rschick@revelunderwood.com
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permalinkThere are still many unknowns in terms of the impact that the Affordable Care Act of 2010 will have on healthcare reform. But medical real estate has bounced back and is now approaching pre-recession levels.
The consensus is that hospitals will continue to employ or joint venture with private practitioners as they have over the past several years. This trend has helped hospitals increase admissions and allowed physicians to focus more on their patients rather than operating their private practice while reimbursements continue to decline.
This trend has and will continue to impact healthcare real estate. An increasing number of real estate transactions are executed on the hospital’s balance sheet since more and more physicians are employees of a hospital. This has been a positive for this sector since the creditworthiness of the physician has been replaced with the financial strength of the hospital. In addition, as physicians become more comfortable with this shift from private practice to employee they are signing longer term leases. This tends to lower long-term vacancy and increase valuations of medical assets.
The long-term impact of healthcare reform remains an unknown. Reimbursement and compensation remain key concerns. This will continue to put pressure on physicians and hospitals to be more efficient and look for ways to cut expenses. This will surely impact medical real estate in the long-term and how providers view their real estate needs.
By Rob Schick, rschick@revelunderwood.com
9300 Maysville Road, Ft. Wayne, IN 46815
- Excellent site in high growth NE side of Ft. Wayne.
- All approvals in place and final grading is complete.
Price: $510,000
Total Site Area: 12.5 Acres
Approval In Place For: 113,150 SF
Click Here to see Images of Property
For More Information Please Contact Rob Schick rschick@revelunderwood.com
Medical office is the darling of commercial real estate today. As a result, we anticipate the development of medical office and outpatient surgery centers to swell in the next 3 – 5 years.
There are a number of reasons why medical office is doing very well and why it will continue to in the foreseeable future. First and foremost 7,000 baby boomers will celebrate their 65th birthday each day in 2011 and 3 to 4 million will each year through 2030. This along with the ever increasing number of people covered by health insurance means more doctor visits and ultimately more outpatient procedures. Secondly, medical office leases tend to be long-term (7 + years) with consistent rent bumps and are almost universally triple net leases. This all adds up to an unprecedented level of interest from investors and an overwhelming approval by lenders to fund these deals.
Nationwide cap rates declined an average of 60 basis points to 7.9% through the second quarter of 2011 from the same period in 2010 indicating that demand is beginning to overtake supply. This will mark a shift in increased development of medical office as the fundamentals are in place to absorb the additional square feet, i.e. 7.9 million square feet will be added in 2011 and its projected that 10 million square feet will be absorbed thereby decreasing the existing vacancy rate of all existing medical office. This fact alone will keep investors developing and acquiring more product and lenders funding these transactions.
It's widely known that credit has become increasingly more difficult to obtain for the acquisition of self storage facilities. Underwriting standards have risen, loan to values have fallen and the number of sources actively lending is smaller than it was several years ago. The good news is that rates are very attractive, the number of active lenders is actually increasing and self storage is now eligible for SBA financing which will certainly increase the volume of transactions in 2011.
There are distinct advantages with an SBA loan vs. conventional financing. First and foremost is a higher loan to value with a typical range of 75% to 90%. Secondly, all SBA loans are fully amortizing with no balloon payments or call provisions and the SBA 7a program will allow an amortization of up to 25 years.
As with any financing option there are also drawbacks. First, this program is designed for "owner- operators" not for a "passive" investor with third party management. SBA doesn't specifically preclude a facility from being managed by a third party but it would be much more difficult to be approved. Also, the SBA is designed primarily for the acquisition or refinance of existing self storage facilities as opposed to the development of a new property so true ground-up construction loans through the SBA would be very difficult to obtain.
There are many particulars associated with this new financing vehicle for self storage and we would be happy to discuss the pros and cons as they relate to your specific needs. In general, we see this as a positive for the industry as it presents an attractive option that didn't previously exist before for the many small self storage operators.Never in recent history has the task of refinancing a commercial property required the effort it does today. The underlying factor is the universal drop in commercial real estate values. What began as a downturn in residential real estate values spread to commercial real estate as the economy worsened, occupancy levels dropped and the collapse of the CMBS market in the third quarter of 2007 thereby eliminating one of the largest players in the debt markets.
The good news is that as of the third quarter of 2010 occupancies have pretty much stabilized across all sectors. Many lenders are back in the practice of lending albeit at different and more stringent terms than just a few years ago and the CMBS market is beginning to shows signs of coming back. Unfortunately, this recent good news doesn't necessarily help existing owners with mortgages maturing in the next year or two. The two main reasons are; lower loan-to-values on mortgages written today vs. pre-2007 and the drop in real estate values. These two factors combined have stripped away much of the initial equity that was present at acquisition. With that said, there are options and there are lenders that understand the underlying value of commercial properties is still present regardless of current appraisals. We work with clients everyday navigating this "new normal" lending environment.
By Rob Schick
