Akron medical real estate attracts national attention from buyers and brokers

The Akron area’s strong healthcare industry is attracting some national attention, and more appear to be on the way as domestic investors target medical real estate in and around the city.

Fairfield Asset Advisors, a Denver-based real estate advisory firm that works with medical facility owners and buyers/investors across the United States, says it has found fertile ground for its work in town and has completed a series of sales she brokered around Akron.

“Akron, Ohio, as you’ve seen, has definitely been good for us,” said Ben Whitney, principal analyst for Fairfield and his point of contact for his work in the region. “We reached a $13 million deal for ophthalmology and an $8 million deal for orthopedics.”

Over the summer Fairfield sold four eye centers with a total of 32,700 square feet of space – at 4099 Embassy Parkway in Fairlawn, 4277 Allen Road in Stow, 4441 Hudson Drive in Stow and 2013 State Route 59 in Kent.

Whitney said her company does not disclose the names of buyers and sellers she works with. But the addresses of the properties sold show that three of the locations house Northeast Ohio Eye Surgeons and the fourth, on Hudson Drive, is listed as the site of Saint Clare Eye Surgery and Laser Center.

Then, in September, Fairfield sold two orthopedic facilities with a total of 26,500 square feet of space for a combined price of $8 million, Whitney said. These included a 22,000 square foot facility at 2007 State Route 59 in Kent, listed as the address of the Crystal Clinic Orthopedic Center; and at 72 Fifth St. SE in Barberton, also a Crystal Clinic location.

None of the vendors responded to sales inquiries, but medical practices at the venues will not be affected; they will simply become tenants of a new landlord, Whitney said. The quality of tenants and their leases is what makes properties valuable in the first place, and leases are the main assets that attract investors, he noted.

The buyers of the properties were both out-of-state, with Flagler Investments of Florida listed in Summit County records as the buyer of the ophthalmology sites, and Kansas-based Crown MedRealty Partners buying the orthopedic sites. .

Representatives for Flagler could not be reached, but Crown MedRealty managing partner Brian Beggs said his company was attracted to properties housing Crystal Clinic operations because he considers them a strong tenant. within an attractive specialist practice.

“For us, it’s kind of a combination of two things. Either it’s a long-term lease with a health care system, the Cleveland Clinic or somebody like that, or it’s a long-term lease. with a leading specialist clinic – and the Crystal Clinic is known to be that,” Beggs said.

Crown MedRealty struck its first deal in Ohio about five years ago when it purchased Mercy Hospital in Massillon, which is now owned by the Cleveland Clinic and is a Crown MedRealty tenant, Beggs said.

Beggs says he would like to buy more medical real estate in the Akron area, in part because it’s more efficient to manage multiple properties in or around a single location.

“We certainly are,” Beggs said, when asked if he was looking for more medical goods here. “We look nationally, but our playbook is that once we acquire in an area, we continue to look for more assets in that area because it allows us to operate more properties efficiently. … I think we will be more active there.”

Crown MedRealty owns about 1.5 million square feet of medical real estate in 43 states, representing investments totaling $650 million, according to Beggs. “We have 12 deals in Ohio now, so it’s going up among our biggest states,” he said.

But there is growing demand for medical real estate in general, in Akron, Ohio and across the country, Beggs and others said — with many other investors favoring him for the same reasons as his company.

Medical real estate tenants are “sticky,” Beggs said. They’ve established patient bases near their offices, they’re often located in purpose-built facilities, and they don’t like to move.

Customers of medical tenants also almost always pay their bills, often through government entities or insurance companies, Beggs said. Add to that the fact that medical services are in demand no matter what the rest of the economy is doing, and you have the recipe for a reliable tenant base, he added.

“People are getting sick everywhere, people are breaking bones everywhere, and people are having babies everywhere,” Beggs said.

That said, both Beggs and Whitney said Akron was above its weight, with a particularly strong healthcare industry – and both said they intended to do more deals in the region. of Akron.

But buyers face growing competition for medical real estate, which has become popular with investors for some of the very reasons Beggs suggests, says Peter Volas, senior director of real estate at the Cleveland Clinic.

“You have investors looking for investment opportunities, and healthcare has always been this sort of safe industry, from an economic perspective,” Volas said.

But as prices rise, the returns available to these investors are reduced, he said, noting that he is now seeing “unheard-of” cap rates below 4% in markets such as New York and San Francisco. Francisco.

At the same time, health care continues to account for an increasingly large share of the country’s gross domestic product, while hospitals and practice groups continue to consolidate and consolidate into larger groups, which which can lead to more real estate sales.

“When they buy the business (doctor’s office), they have to take care of the real estate,” Volas said, and some investors choose to sell it.

Some practice groups, and to a lesser extent hospitals, view their real estate as something that can be monetized through sale-leaseback agreements, both Volas and Whitney said.

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“You have all this momentum, and then you get people competing for properties,” Volas said. “They’re getting very aggressive with buying prices.”

Although the clinic has no plans to sell any of its current facilities and prefers to own its real estate, Volas said the trend of others selling their real estate and investors looking to buy it is expected to continue. .

“I don’t think it’s going to slow down,” Volas said. “And I don’t think markets matter, whether it’s Akron/Canton, Cleveland or Indianapolis.”

Whitney said he knows of many eager buyers across the country, in addition to Crown MedRealty, who would be interested in more healthcare real estate around Akron or northeast Ohio in general. he could find properties to sell to them.

“Akron is now in our top 100 MSAs,” Whitney said. “So it’s definitely a place where we’re looking to do more. … It’s a hot market.”

This story first appeared in our sister publication, Crain’s Cleveland Business.