$1B Healthcare JV Targets Medical Outpatient Properties

Healthcare Realty Trust and KKR form a $1B joint venture focusing on medical outpatient facilities.
May 7, 2024
Healthcare Realty Trust and KKR form a $1B joint venture focusing on medical outpatient facilities.
  • Healthcare Realty Trust and KKR’s plan to invest $1B in medical outpatient facilities.
  • Healthcare Realty will bring $383M in high-performing medical properties to the partnership and will be the primary operator.
  • KKR invested $600M, signaling institutional confidence and long-term commitment to expanding in the medical property sector.
Key Takeaways

Healthcare Realty Trust (HR) and KKR & Co. (KKR) join forces for a $1B partnership focusing on medical outpatient properties.

Medical Property Injection

Nashville-based Healthcare Realty Trust and global investor KKR have announced a joint venture partnership to invest up to $1B in medical outpatient buildings, signaling the dependable resilience of the healthcare property sector.

Healthcare Realty plans to seed the venture with 12 properties, valued at almost $383M, and will own about 20% interest in the JV portfolio. Meanwhile, KKR will contribute 80% of the combined value with $600M.

Notably, Healthcare Realty’s CRE portfolio is heavily concentrated in the Sun Belt (and Texas in particular) and includes 3.6MSF in Dallas and 2.4MSF in Houston.

Future Investment Potential

KKR’s significant capital commitment is a bold and strategic move to maximize the JV’s capabilities, with a confident focus on long-term growth and stability in the stable and growing sector.

Healthcare Realty expects to see a $300M return over time for their part, and both companies anticipate further collaborations and medical acquisitions, aligning with the broader industry trend of new and innovative CRE monetization strategies to address mounting financial pressures.

Operational Management

Healthcare Realty will play a key role in managing day-to-day operations and leasing at the jointly owned properties, leveraging its expertise in real estate portfolio management to ensure operational efficiency and success.

The firm’s 12 high-occupancy properties, spanning 762.4KSF and mainly located near leading hospital campuses in seven major metros, should undergo a seamless integration into the JV portfolio.

Why It Matters

The $1B JV couldn’t come any sooner. For over a year, average U.S. hospital margins have wallowed in the red, and property-related expenses represent 8–12%, of a health system’s overall expenditures, according to a JLL report.

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