The sale of Capella Healthcare to a real estate investment trust heralds more deals to come between hospital operating companies and REITs as more providers realize it's time to cash in on their rich real estate portfolios, analysts say.
Acute-care hospitals are now just one piece of the continuum of care that health systems need to control. As the market's demands shift, providers are assessing which pieces they need to own outright and where they could monetize their real estate. Meanwhile, REITs are banking on continuing strong demand for healthcare services as more Americans gain insurance and the population ages.
“There's been an increasing amount of competition to own hospital facilities,” said Mindy Berman, healthcare practice lead in the capital markets group of JLL, an investment management firm specializing in real estate.
Capella, a privately held, Franklin, Tenn.-based chain with 11 hospitals, last week said it will be sold to a real estate investment trust in a $900 million deal. Medical Properties Trust, which focuses exclusively on acute-care facilities, will own Capella's real estate, while the hospital operations will be jointly owned and managed by MPT and Capella's senior management. Private equity firm GTCR has owned Capella since its founding in 2005.
The transaction is the second this year in which a REIT has purchased a hospital operating company and separated the real estate from its operations. In April, Ventas, a REIT, forged a $1.75 billion deal to acquire Ardent Medical Services from its private equity owner, Welsh, Carson, Anderson & Stowe. Similar to the Capella deal, Ardent's current management and other investors will own the hospital operations, with Ventas retaining a 9.9% stake.
Hospital systems, many of which operate with thin margins, have been trying to reinvent their business at a time when they also need to invest in areas such as physician recruitment and information technology. As more care moves to outpatient settings, hospitals often are operating with unused capacity in their acute-care wings.