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Med-office Sales
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a market like Hartford with size, with great
healthcare partners in the buildings, and
with a great [building] management team
already with Casle and Grove Properties.''
Milligan says the success of medical offices
tends to be driven more by tenants, many of
which are large hospital or physician practices
that typically commit to long-term leases in
their buildings. By contrast, the profitability
of nursing homes and other assisted-care real
estate is fueled more by the operator, he said.
Casle CEO David Sessions said one other
factor helped make its properties attractive
to HTA. It is the decline in capitalization, or
"cap" rates for many categories of income-
producing real estate, Sessions said.
Tied to prevailing interest rates, the cap
rate is a common real-estate industry gauge
for calculating the rate of investment return
on a property based on the income it generates.
"Generally, across the country, cap rates
have trended downward, which increases the
value of income-producing properties,'' said
Sessions, adding he hasn't seen real estate
cap rates this low in the last 26 years.
REITs are always buying and selling real
estate into and out of their portfolios, chasing
the best returns, or yields, Sessions added.
"This is very much an interest-rate sensitive
market,'' he said. "They're a prudent company
looking for yields demanded by investors."
But some healthcare tenants may pose
a moving target for HTA and other medical-
office landlords.
Mark Teare is regional director, real estate,
for Trinity Health-New England, parent of St.
Francis Hospital and Medical Center and four
other Connecticut and New England hospitals.
Teare said Hartford's medical-office mar-
ket is a combination of newer, state-of-the-art
spaces and older, outmoded facilities. Mean-
time, Trinity-New England is drafting a region-
al strategic plan for all of its spaces — owned
and leased — to determine how to make the
most efficient use of them.
"We're going to be much more selective in
our site selection, and we will also be looking
at consolidation opportunities,'' he said.
Hartford Hospital, by contrast, says it has
more than 100 leased medical-office building
sites in Connecticut.
Retail locations, too, are candidates for
medical offices, said Teare, who recently
inspected a "relatively large space'' in a
shopping center whose location he declined
to identify.
In late September, Farmington
insurer ConnectiCare said it will open four
retail centers this fall for face-to-face delivery
of health-insurance services in Manchester,
Newington, Bridgeport and Orange. n
