Why Medical Office Owners Are Looking Closer at Senior Housing

The seniors housing and medical office building industries may have more in common than meets the eye. In fact, they may be more like close family than distant relatives, according to some experts.

The sectors are undeniably growing closer, according to Gino Lollio, vice president investments at national brokerage firm Marcus & Millichap and senior director of the Institutional Property Advisors (IPA), a division of Marcus & Millichap.

“A couple of years ago, the seniors housing and medical office building sectors were distant cousins, in a sense,” Lollio tells Senior Housing News. “Now, they’re more like siblings.”


This trend is alive and well in Florida, where one real estate owner is developing a senior housing community on the same campus as a large medical office building—and is expecting the two buildings to thrive off of one another.

A growing overlap

There’s definitely an overlap in seniors housing and medical office building owners—and it may be growing.


“They’ve grown a lot closer in the investment profile, or in who the players are that are aquiring them,” Lollio says.

The “Big Three” health care real estate investment trusts (REITs)—Ventas (NYSE: VTR), HCP Inc. (NYSE: HCP) and Welltower (NYSE: HCN)—all invest in the medical office space, with Ventas, for example, recently acquiring a portfolio of life science and medical real estate assets from Blackstone Real Estate Partners VIII LP for $1.5 billion in cash. And more and more, Lollio’s noticing senior housing sessions at conferences meant for the medical office building industry.

That’s because medical office building owners are chasing something senior housing can provide.

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“Medical office building owners that are moving into seniors housing are chasing yield,” Lollio explains. There’s been compression of cap rates across the medical office building industry over the past few years, he says—and medical office owners who want to venture into seniors housing feel the time is right to do so.

“Those groups, having raised as much capital and money as they have, are seeking opportunities that will yield them the best returns with the same risk profiles as medical office buildings,” Lollio says.

Additionally, some of the cross-over in seniors housing and medical office building ownership can be attributed to companies wanting to “take advantage of the health care continuum,” Lollio says.

“They want to get in at different stages,” he explains. In a way, these real estate owners are capturing consumers throughout their life cycle—especially if they are also purchasing student housing and self-storage properties, Lollio says.

It’s possible that this trend in owning both seniors housing and medical office buildings will continue.

“As more groups do it, others will kind of follow suit,” Lollio predicts. “It seems like it has become a natural or organic evolution in our sector.”

The two asset classes definitely have a few things in common, including— but not limited to—the fact that they both play a role in the health care continuum.

“Location is also critical to both asset classes,” Tom Klaritch, executive vice president of medical office properties at Irvine, California-based real estate investment trust (REIT) HCP Inc., tells SHN. “It would be beneficial for a medical office building to be next to a senior housing community, which has a patient base that’s often in need of medical assistance.”

Synergies abound

The convergence of senior housing and medical office buildings can be seen first-hand at the Spring Lake Health and Living Campus in Dr. Phillips, Florida, which is currently under development and expected to open in January 2017.

The project features a 60,000-square-foot medical office building on the same campus as a 186-unit senior housing complex, with Orlando, Florida-based philanthropic organization Dr. Phillips Charities developing and owning both buildings. 

Dr. Phillips Charities has built and held commercial real estate in the past, Dr. Phillips President and CEO Kenneth Robinson tells SHN. In that sense, the new medical office building is a more traditional investment for the organization than the senior housing community, he explains.

“This will be our first adventure into senior living,” Robinson says. “What we found out quickly was that it is not a traditional lease of a building.”

Dr. Phillips chose Vero Beach, Florida-based senior living operator Harbor Retirement Associates (HRA) to operate its independent living, assisted living and memory care rental community because HRA and Dr. Phillips share common core values, Robinson explains.

The medical office building, meanwhile, will be occupied by primary care doctors, pediatric physicians, oncologists, cardiologists, gynecologists and more from Orlando Health, a health care system with which Dr. Phillips has a longtime relationship, Claire Fournier, Orlando Health’s chief strategic partnership officer, tells SHN.

All parties involved in the Spring Lake project are hoping that the campus proves synergistic and beneficial to everyone involved. 

“The goal here is that there will be synergies that exist between the medical office building, senior housing community and Dr. Phillips’ YMCA, which is a senior-focused YMCA,” Charlie Jennings, HRA’s chief development officer, tells SHN.

While this set-up is somewhat unique, it may become more common in the future. 

“To be on a campus that is adjacent to a medical office building is somewhat rare, but we believe it’s something we’ll see more of,” Jennings says. After all, the close proximity between the senior living community, the medical office building and the nearby Dr. Phillips Hospital will hopefully allow for “a smooth transition from one care level to the next,” he says.

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Written by Mary Kate Nelson

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