Davis Cos. Selling MOB Gem to Anchor, Carlyle for $55M+ in Newmark Exclusive

May 24, 2018 — By Joe Clements https://therealreporter.com/article/davis_cos._selling_mob_gem_to_anchor_carlyle_for_55m_in_newmark_exclusive 

BURLINGTON—A “Who’s Who” of top medical office investors have spent much of 2018 battling over 67 South Bedford St. here along Route 128, and two of those titans are uniting to purchase the 177,000-sf asset owned by Davis Cos., sources relay in tabbing Anchor Health Properties and Carlyle Group as winners of the fast-paced campaign conducted via Newmark Capital Markets. The listing drew institutional office buyers as well as MOB aficionados sufficient enough that upwards of 15 national players tendered bids, sources relay, pushing its price past $55 million should unofficial estimates between $310 and $315 per sf prove accurate.

Aided by other members of the Capital Markets Group, including Robert E. Griffin Jr., Newmark’s Medical-Academic Practice Group is leading the charge peddling 67 South Bedford St., confirms Managing Director Michael R. Greeley, but he declines to say whether any parties are in negotiations to buy the building or answer rumors such as pricing levels. The division which includes founding principal Frank Nelson did see a “remarkable” turnout for 67 South Bedford St., Greeley reports, citing multiple reasons including the sponsor’s astute decision to go all-in dramatically re-purposing a mid-1980’s office building acquired in January 2015 for $36.7 million.

“Davis Cos. has done an outstanding job facilitating the conversion of 67 South Bedford St. into a premier outpatient facility, and the ultimate buyer will be stepping onto a flagship campus of the new Lahey/Beth Israel/New England Baptist integrated (health provider) system, which will be second largest in Massachusetts,” Greeley says, that recently approved merger of leading hospitals including the renowned Lahey Clinic which is located next door to 67 South Bedford St. Lahey was occupying office space there when Davis Cos. arrived, and the landlord’s MOB vision met with the apparent approval of hospital officials, considering Lahey renewed and now doctors see patients there for such purposes as dermatology, internal medicine and physical therapy while occupying approximately half of the building’s footprint. The facility features over 100 exam rooms, according to Greeley, crediting the landlord for understanding how to lay out the space and attract a congruent balance among tenants.

Davis Cos. is hardly a newcomer to the realm, with founder Jonathan G. Davis joining longtime colleague Paul Marcus redeveloping a property near Massachusetts General Hospital in the 1990s into a premier MOB complex. The MOB world has evolved substantially from an investment perspective during the new millennium, explains Greeley, and he points to 67 South Bedford St. as evidence those lessons learned have been lasting for the sponsor. “It is remarkable to get the kind of response we got for a suburban asset that we did there—that doesn’t happen very much any more,” he says of the broad turnout, adding, “Davis Cos. understood the market and what needed to be done, and they executed flawlessly.”

Joining Nelson, Greeley and Griffin on the assignment are Executive Managing Director Matthew E. Pulllen, Director James M. Tribble and Associate Director Samantha Hallowell.

Greeley, who would not identify any of the parties angling for the building, surmises the straight office investors competing were drawn by the strong cash flow and proven location, seemingly willing to adjust their platform. It is also a sign, he maintains, of an expanding investor acceptance of MOB assets. “It is no longer a niche (product),” he says, with Anchor Health and Carlyle’s venture underscoring that evolution.

After all, those two firms formed a powerful union three years ago that has been chasing institutional-grade MOBs on a national scale. Also, this spring, Anchor and Morgan Stanley separately tied up a trio of such buildings in Philadelphia and North Carolina totaling 250,000 sf.

Carlyle and Anchor are also not strangers to Newmark’s Medical Academic Practice Group, exclusive agents when the JV purchased Cross Street Medical Center in Norwalk, CT, this past November for $23 million. The seller in that instance was Marcus Partners, its founding namesake Davis’ partner in the 1990’s Boston project, Paul Marcus.

Greeley would not provide a timetable for any closing on 67 South Bedford St. The brokerage shop does have other listings in play regionally, including one outlined in the most recent Real Reporter where the contingent is selling a medical office building next to a Norwood Hospital. Expected to bring upwards of $25 million, it shares a feature also held by 67 South Bedford St. Greeley deems attractive to investors: a strange provision in the Affordable Care Act, aka Obamacare, gives medical providers higher federal reimbursement rates for procedures performed within 250 yards of their medical base, i.e. Lahey Clinic in the case of 67 South Bedford St. and in Norwood, fhe erstwhile Guild Hospital, today branded Steward Norwood Hospital, is next door to 825 Washington St. which Steward Healthcare leases and Newmark is selling for Grander Capital Partners.

“It is evident sophisticated institutional buyers appreciate the value and scarcity of campus-adjacent assets that are anchored by major hospitals,” Greeley says, adding, “The tremendous market interest in (67 South Bedford St.) bodes well for Norwood Medical Center.”