Despite the current economic downturn and credit crisis, health care commercial real estate’s long-term growth prospects are favorable, according to Grant Edwards, national director for Sperry Van Ness’ Healthcare Real Estate Team.
Edwards began his career at brokerage Marcus & Millichap in 2006, where he worked in the Chicago-based seniors housing group. There he was responsible for seniors housing transactions, primarily in the Midwest. In March 2008, Edwards joined Sperry Van Ness to launch the brokerage’s Healthcare Real Estate Team nationally from St. Louis. NREI recently spoke to Edwards about the new division, which includes seniors housing.
NREI: What services will you provide for the seniors housing sector and what are your near-term goals?
Edwards: We will be focusing 100% on investment sales. Typically we’ll have owners who have anywhere from one to 20 facilities or more. The deal sizes vary substantially but our typical transaction is in the range of $3 million to $15 million single- and multiple-facility deals. We’re representing owners of independent living facilities, assisted living facilities, skilled nursing facilities and any combination thereof, as well as medical office properties.
NREI: Is Sperry Van Ness’ expertise in the medical office sector synergistic with some of the areas of seniors housing such as assisted living and skilled nursing facilities?
Edwards: Absolutely, and increasingly so. There are lines of integration between seniors housing on the one hand and medical office on the other. REITs have made forays into the medical office space over the last couple of years. If you look at the market capitalization of firms like Health Care REIT, most of these groups have significant holdings in seniors housing. It might constitute somewhere around 60% to 70% of their portfolio.
Most of them have been growing their medical office holdings along with their seniors housing investment. So the idea is that health care real estate as a whole really provides a unique asset class, and I think that it provides investments that are relatively insulated from the economic downturn.
NREI: Can you give us some detail about the Healthcare Real Estate Team, and how it will be implemented?
Edwards: We’ll have centralized branding and underwriting coming out of my office in St. Louis, and we’ll have boots on the ground in almost every region of the country in 2009. We’re well positioned to take business nationally right away. For our purposes in seniors housing, I think we’ll be able to differentiate ourselves pretty substantially from the competition because we’ll have not only the national platform, accompanied by billions of dollars of sales behind us, but we’ll also have a better-focused level of specialization at the regional and local level.
NREI: What are your goals for the new division in 2009?
Edwards: Provided that we expand as quickly as we think we can, and provided that we have multiple advisors [brokers] in various parts of the country out working from day one, we’ll be in the position to take listings nationally by Feb. 1. This market is pretty difficult and getting transactions closed even if you are in the most promising sector of commercial real estate is tough. We’d be pleased if we had somewhere between five and 10 closed transactions right off the bat, and that would be sufficient for year one.
NREI: What was the impetus to launch the health care division now?
Edwards: Health care real estate really does enjoy tremendously strong fundamentals, unwritten in large measure by the aging of the baby boomers. Recent economic data shows that the health care real estate sector was the only part of the economy to grow last quarter, along with education. We’re not necessarily taking a short-term perspective and looking at the current troubles with the capital markets and the current downturn in the economy as something that would prevent us from launching this product. It’s been in the planning stages for quite a long time. I think it’s the right time for us, in terms of Sperry Van Ness’ structure and our readiness to capture a lot of market share.
NREI: What is it about Sperry Van Ness’ structure that would give you an advantage in the marketplace?
Edwards: Sperry Van Ness has a really strong brand nationally and a culture of cooperation amongst its network of advisors nationally. So we’re able to leverage a tremendously strong national platform, and also very quickly and effectively we’re able to partner with some of the best brokers in the country to launch Health Care Real Estate Team.
We’ve got a strong affiliation with some of the top lenders in the country for seniors housing and we’ve got programs in place to make sure that when we list and market a property, we have the ability to help both the seller and the buyer by going out there and helping to arrange financing for the transaction.
NREI: You come from Marcus & Millichap, which is a very aggressive environment for investment sales. What makes a good investment sales specialist?
Edwards: There is something to being aggressive, but I interpret the word ‘aggressive’ to mean relentless in trying to create value for clients. If interpreted that way, I agree one hundred percent that it’s great to be aggressive. A really successful investment sales person is someone who looks for opportunities to create value for the client, to connect the unconnected, to connect buyers and sellers.