Capital Square 1031 has purchased two recently built medical facilities in Central Texas that are leased to a company that provides care for traumatic brain injuries.
The buyer purchased the properties, which are leased to NeuroRestorative for 15 years on a net lease, from Simpkins Group, a real estate investment and development firm based in Houston. Simpkins Group developed the buildings for NeuroRestorative, which specializes in post-acute neuro-rehabilitation in Central Texas.
Combined, the buildings are about 35,000 square feet. Capital Square 1031 took out an acquisition loan for $13.4 million from Cantor Commercial Real Estate Lending for the deal, according to public records and a statement from Capital Square 1031. The price of the sale was not disclosed.
“Capital Square’s investors are becoming increasingly concerned about the U.S. economy entering a recession,” Louis Rogers, founder and CEO of Capital Square 1031, said in the statement. “We like medical real estate because, in good and bad economic times, people need medical care.”
The deal comprises two properties:
- A 16- to 24-bed facility totaling 15,139 square feet of medical space at 5150 A.W. Grimes Blvd. in Round Rock, which is a northern suburb of Austin
- A 24-bed facility in a building totaling about 20,000 square feet of space at 18931 Hardy Oak Blvd. in San Antonio
The buyer bought the properties as part of a 1031 exchange deal, which allows investors to sell one property at a gain and reinvest all the proceeds into a similar property. By doing so, they defer paying taxes on any of the gains. The exchange is arranged through a qualified intermediary who sells the property, buys the replacement property, and then transfers that deed over to their client.
Capital Square 1031, which is based in Glen Allen, Virginia, has acquired 87 real estate assets for more than 2,000 investors totaling $1.6 billion in deal volume since its inception, according to the company.
Healthcare spending, which is tied closely to U.S. employment and population growth, is expected to grow as the population ages. Today, Americans older than 65 make up 15% of the population, and the U.S. Census Bureau projects that figure will swell to 21% by 2030. By 2060, nearly one in four Americans will be older than 65.
“The aging U.S. population has a direct effect on the demand for health care as doctor visitors and medical expenses dramatically increase with age,” according to JLL’s 2019 Healthcare Real Estate Outlook. “On average, people over the age of 65 spend five times more on health care than their younger counterparts.”
Real estate investors are taking more interest in medical office buildings as higher prices and risks in other property types have squeezed annual returns, according to a CoStar report titled “Investing in Medical Office: Just What the Doctor Ordered.”
Medical office sales rose 10% to $17.5 billion this year, 2.7 times higher than the peak prior to the last recession, as more institutional investors took interest in the sector.
For the Record
Adam Levinson of NKF Capital secured the loan from Cantor with a 4.278% fixed rate for 10 years. JLL’s Rick Goings, Rudy Hubbard and Kevin McConn represented the seller, Simpkins Group, in the sale.