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Welltower snaps up 55 medical office facilities in $1.25 billion deal

Welltower will pay $1.25 billion for 55 medical office and outpatient facilities owned by CNL Healthcare Properties, the organizations announced Wednesday.

The Class A properties, which include post-acute facilities and specialty hospitals, are 94% full and boast average rent increases of 2.4% a year. The facilities feature 3.3 million square feet in metro areas across 16 states. The vast majority are affiliated with major health systems including Novant Health, Memorial Hermann Health System and Cleveland Clinic.

“Through the strategic acquisition of 55 high-quality medical office buildings from CNL Healthcare Properties, we continue to accretively expand our outpatient medical and health system portfolio,” Shankh Mitra, Welltower’s chief investment officer, said in prepared remarks.

The value of real estate deal involving medical office properties fell to just under $12 billion in the second quarter of 2018 but didn’t stray far from the peak of $14.2 billion reached within the past decade, according to a recent report from commercial real estate firm CBRE. More medical office deals are being made in cities with high population growth.

Vacancy rates in medical offices have consistently been lower than the total office sector, CBRE data show. Vacancy dipped from 11.1% in 2010 to 8.4% in the second quarter of 2018.

Welltower has been an interested buyer in the post-acute space. The real estate investment trust agreed to buy HCR ManorCare’s skilled nursing and memory care real estate for about $2.2 billion as part of the ProMedica acquisition.

CNL is a real estate investment trust focused on senior housing. It plans to use the proceeds from the sale to repay debt, pay closing costs and other related expenses.