Princeton Medical Arts Pavilion at 5 Plainsboro Road in Plainsboro — Courtesy: JLL
By Joshua Burd
A large medical office building near Princeton has changed hands as part of a seven-state, 1.4 million-square-foot portfolio sale announced Tuesday by JLL.
The 137,842-square-foot building, located at 5 Plainsboro Road in Plainsboro, is the largest among 17 buildings that made up a collection of medical and health care properties marketed by JLL. The firm represented Bentall Kennedy, which owned the portfolio on behalf of a state pension fund, in the sale to an affiliate of the global investment management firm Heitman LLC.
Terms were not disclosed.
The complex known as the Princeton Medical Arts Pavilion is 86 percent occupied and anchored by Penn Health and Princeton Health, JLL said. It is part of a portfolio assembled by Bentall Kennedy over the last 12 years through new development and acquisition, the firm said, noting that the properties are Class A medical office buildings located on the campuses of highly rated, market-leading academic health systems.
The overall portfolio are 96 percent occupied. Denver-based NexCore Group will manage and lease the Plainsboro property and all 16 others.
The so-called PHT portfolio also includes seven buildings in Texas, five in Indiana and one each in North Carolina, Virginia, Missouri and Illinois. In a news release, JLL said the sale builds on momentum that propelled sales of medical office buildings in 2017 to a record level of $9.5 billion, which the firm said is past the previous high-water mark of $9 billion in 2015 and substantially higher than the typical annual volume of $5 billion.
“Health care real estate is emerging from the shadows of alternative sectors and is increasingly being viewed as a staple asset,” said Jonathan Geanakos, president of JLL Capital Markets for the Americas. “Interest in medical office is at an all-time high given the robust capital available for real estate investment, especially from core investors and foreign capital seeking durable income from stable product offering attractive yields.”
JLL Managing Director Mindy Berman added that the portfolio “attracted a high level of interest from a roster of well-known private and public health care investors, as well as many institutional core funds and foreign investors.”
The firm said investors’ appetites are being fed by an industry that has been steadily migrating to lower-cost outpatient settings, which is causing a spike in outpatient visits and a projected increase of 20 percent over the next decade. Outpatient services now constitute more of hospital revenue than inpatient care for the first time in history, JLL said, noting that annual health care spending is projected to grow by more than 5 percent a year, most of which is earmarked for ambulatory settings.
“The PHT Portfolio is a high-quality, well-diversified portfolio of premier properties with near-100 percent occupancy and a collective tenancy of highly-rated, market-leading health systems,” said Brian Pieracci, Heitman managing director. “The Class A portfolio exhibits nearly all of the qualities that we look for when acquiring core medical office properties for our portfolio.”
