In an era of nontraditional partnerships, the sale of for-profit hospital chain Ardent Medical Services to Ventas this year stands out.
For Ventas, a real estate investment trust, the deal marked its first entry into the hospital market after limiting its holdings to senior housing, medical office buildings and post-acute-care facilities. The $1.75 billion deal was one of the largest transactions between a hospital operator and a REIT.
Three months later, hospital operator Capella Healthcare disclosed that it would sell its real estate, too, making a $900 million deal with Medical Properties Trust, a Birmingham, Ala.-based REIT.
In both transactions, the REIT planned to separate the real estate from the operations and retain a stake in the new operating company.
“Our thesis is that the acute-care hospital will always be at the top of the food chain,” said Edward Aldag, Medical Properties' CEO. “When you look at the overall revenue, clearly there's been a shift from inpatient to outpatient. But it hasn't been a move away from the hospital. So we don't view that as a bad thing.”
The Capella deal also is the largest buy for Medical Properties, which has specialized in acute-care assets since its founding. Hospitals currently account for 70% of its portfolio, but it aims to increase that number even further.
The healthcare real estate market has been booming, driven by the convergence of several trends. The shift of care from inpatient to outpatient has increased demand for on- and off-campus medical space. Providers, who are hungry for capital to invest in new care-delivery models, can raise money by selling off real estate. And low interest rates have driven up the price of those real estate assets across the country.