Newmark Grubb Knight Frank’s (NGKF) Phoenix office, in collaboration with Global Healthcare Services, announced the completion of a $141 million sale of the Integrated Medical Services portfolio encompassing four Class A medical office buildings totaling 406,894 square feet. This portfolio sale sets a new record for the Phoenix Metro area as the highest price paid at $347 per square foot for an on-campus, multi-tenant medical office portfolio.
NGKF Global Healthcare Services Executive Managing Directors Garth Hogan and Todd Perman, along with Directors Trisha Talbot and Kathleen Morgan in the Phoenix office, represented the sellers. The buyer, Physicians Realty Trust, a self-managed healthcare real estate company, was self-represented.
“This portfolio commanded such a high price because of the quality of the buildings and its ownership by physician-led organizations. It’s rare to have such a collection of trophy assets built by doctors who are immersed in the healthcare community. As experts in the field, they have exceptional insight into the location and development of these assets,” Hogan said. He added that the team fielded numerous offers during the marketing process, further underscoring the unique value of the asset and ownership.
“This sale provided an important opportunity to monetize our assets at a point when we knew we’d gain the greatest value. The buyer, Physicians Realty Trust, truly understands the physician’s perspective and we respect their approach to healthcare real estate. We look forward to working with them,” said John Dover, MD, the management representative for the sellers.
The portfolio is currently 96% leased and anchored by physician practice groups. The properties, built from 2004 to 2009, are situated in premier locations for medical practices in Maricopa County; three of the medical office buildings are located on hospital campuses. The buildings include: Paradise Valley IMS totaling 122,790 square feet; North Mountain IMS Medical Building totaling 121,976 square feet; Palm Valley Medical Office Building totaling 101,241 square feet, and Avondale IMS totaling 61,614 square feet.
“These newer, well-occupied MOBs that attract strong tenants reflect the continued performance of MOB assets,” Talbot commented. “Physicians Realty Trust targets their investment in physician-owned MOBs throughout the country. For this reason, they will create a smooth ownership transition here in Phoenix.”
According to NGKF, the medical office market has continued to outperform the general commercial real estate market, which has accelerated investor demand for this asset class. As a result of the proven resiliency and long-term security, medical office buildings have become a mainstream asset for institutional and private investors and are viewed as one of the most highly sought after asset types in commercial real estate.
“This transaction is indicative of the appetite of institutional capital to acquire provider/physician-owned medical office properties in strong markets throughout the country. There has never been a better time for physicians who own their medical buildings to sell and capitalize on the highest values we’ve seen,” Hogan added.