March 28, 2019
Strengthening DOC’s Portfolio through Strategic Investments in New Development
Since Physician Realty Trust’s (NYSE: DOC) initial public offering in 2013, the company has focused on acquiring an exceptional portfolio of medical properties. We Invest in better® to achieve our commitment to better buildings, better health care, and better returns. And while cultivating a high-quality portfolio is a seemingly straightforward goal, we recognize that every property, seller, and transaction is unique. We attribute our success to strong relationships, financial savvy, creative thinking, and our ability to identify accretive opportunities.
One such creative approach is financing the development of new health care facilities with premier heath care real estate developers with the option to purchase the fully-occupied facility upon completion of construction. “This has really become a strong avenue of investment opportunity for us,” Deeni Taylor, Executive Vice President and Chief Investment Officer, said. “We’ve been able to acquire high-quality health care real estate leased to strong credit-rated tenants before it ever reaches the open marketplace.” As an investment tool, this development strategy requires the type of vision, creativity, and experience DOC has worked so hard to cultivate. “When you’re going to buy a piece of real estate before it’s built, you need a whole different level of expertise to analyze and understand the process, a know-how that Physicians Realty Trust brings to the table,” David Domres, Vice President of Construction and Project Management, shared. “You must have patience, because often the path from concept to project approval and finally execution may take years. The work we’re doing today will be beneficial to our portfolio’s growth in the years to come.”
As DOC works to expand this pipeline, the new 56,800 square foot Ascension Sacred Heart Health Center at Summit facility in Pensacola, Florida, is a showcase of DOC’s development approach. Acquired in December 2020, the asset is also a testament to DOC’s emphasis on relationships as a means to building strong health care partnerships. The Pensacola project began several years ago when Ascension approached a local team, NNGS Development, to construct a new specialty clinic. With an optimal development site, the project features six operating rooms for outpatient surgery, an advanced imaging center, and a women’s clinic.
DOC was invited to the table as a potential financing partner based upon our strong relationships in the market and solid reputation as a long-term real estate owner and trusted partner. “The hospital was deeply invested in selecting the ownership group,” Taylor notes. “That’s often the case in these types of deals – certainly any health care partner wants to choose their landlord.” DOC was honored to be selected to finance the development, funding construction throughout the project. Soon after occupancy, DOC’s loan was converted to ownership, with NNGS receiving cash and units in DOC’s operating partnership for the value they helped create in sourcing this opportunity, managing the development process, and working closely with the hospital’s team to make this a success for Sacred Heart and a long-term investment for DOC. This financing model lowers the hospital’s financing cost, reduces capital risk, and generates higher yields for DOC by minimizing risk throughout the process. This structure benefits Sacred Heart and its long-term mission of increasing access to high-quality health care and DOC’s shareholders as well.
In addition to the focus on building a facility to deliver outstanding patient care, the team also took steps to ensure the site’s environmental stewardship. The property retained many mature oak trees, which were identified as an essential aspect of the broader Pensacola community’s master development plan. Together, the team established a construction and landscaping plan to preserve and highlight the stately trees while incorporating an abundance of other native plants and sustainable features. “At DOC, our soul is health care real estate, and our partners’ soul is the delivery of care,” Domres adds. “Our ability to participate in these types of projects is the perfect opportunity for us to grow and expand our provider relationships and to develop new ambulatory care facilities, serving as the future of health care delivery.”
"This has really become a strong avenue of investment opportunity for us. We’ve been able to acquire high-quality health care real estate leased to strong credit-rated tenants before it ever reaches the open marketplace."
— Deeni Taylor | Executive Vice President & Chief Investment Officer