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Healthcare Realty, KKR Form JV to Invest $1B in Medical Buildings

Healthcare Realty and KKR join forces to capitalize on outpatient real estate properties.

Together with

Good morning. Healthcare Realty Trust and KKR form a $1B JV to acquire and manage medical outpatient buildings. Meanwhile, Massachusetts is considering a mansion tax to fund affordable housing projects.

Today’s issue is brought to you by PACE Loan Group — a national lender offering owners non-recourse, long-term, fixed-rate C-PACE financing.

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Healthcare Realty Trust, KKR Form JV to Invest $1B in Medical Outpatient Buildings

Healthcare Realty, KKR Form Outpatient JV

Healthcare Realty and KKR join forces to bolster outpatient real estate investment.

Healthcare Realty Trust (HR) and KKR & Co. (KKR) are teaming up to establish a $1B JV to capitalize on the growing demand for outpatient healthcare services.

Maximizing value: Healthcare Realty will seed the JV with 12 properties valued at $382.5 million, maintaining a 20% interest, while KKR will contribute $600M, or 80% of the JV’s total value as equity. This collaboration is set to unlock approximately $300M in proceeds from the initial property contribution.

Zoom in: The initial 12-property portfolio are medical outpatient buildings in seven major U.S. markets near leading hospital campuses. Totaling 762.4KSF and boasting a 98% occupancy rate, these assets will be transferred into the JV portfolio, which Healthcare Realty will oversee on a day-to-day basis.

Impact on providers: Real estate costs account for 8–12% of healthcare systems' overall spending. JLL's recent analysis identifies key trends—demographic shifts favoring outpatient care, technological advances, and reimbursement changes—as driving factors. Coupled with high construction and financing costs, this has spurred demand for existing outpatient facilities.


Two is better than one: Healthcare Realty and KKR’s joint venture addresses the growing need for outpatient facilities, particularly in rapidly expanding regions like the Sun Belt. Combining Healthcare Realty's management expertise with KKR's investment power makes them well-suited to meet this demand.


C-PACE expands across the U.S. Is your state one of them?

The public-private partnership of the C-PACE programs has gained momentum across the country, with more than 7,000 financings completed since 2015.

Each year, more and more property owners are using C-PACE to blend down the cost of capital for renovations or ground-up construction, with more than $2 billion placed in 2023.

That success is encouraging expansion across the U.S. Across the country, these states have taken steps toward creating viable C-PACE statewide programs:

  • Georgia: Statewide legislation was approved by the House and Senate and signed into law by Governor Kemp.

  • Idaho: Legislation passed both the Senate and House and was signed into law last month by Governor Little.

  • New Jersey: The program is finally expecting a launch in Q3 2024.

  • Alaska, Hawaii, Florida, Minnesota, and New York, have also updated their laws to broaden the application of C-PACE.

✍️ Editor’s Picks

  • Foreclosures up: CRE foreclosures were up 117% Year over Year in March to 625, the highest figure since March 2015. 

  • Brokerage boom: JLL reported $5.1B in Q1 revenues and profit growth through efficient cost-cutting and rising deal activity.

  • Top bank predictions: JPMorgan Chase CEO Jamie Dimon estimates there’s a 65% chance of a recession, while Citi economists predict the Fed will cut rates 4 times.

  • Tasty returns: Avison Young's latest report shows there are 195.5K QSR locations worth $406.7B in the U.S., with 10.28% growth projected through 2029, led by Yum! Brands (YUM).

  • Wynwood wonderland: A JV secured $141.5M for the NoMad Residences project in Miami's Wynwood neighborhood, featuring 329 units and 18.5KSF of retail space.

  • Tightening screws: U.S. banks tightened C&I and CRE loan standards as demand continues to weaken—15.6% of banks tightened C&I loans, while 26.6% reported decreased demand.


  • Loan troubles: Arbor Realty Trust's (ABR) non-performing loans rose by 70% to $465M in March, with $1.9B in loan modifications, mostly to CLOs.

  • Multifamily boon: In Q1 earnings calls, multifamily REITs reported rising rents, falling concessions, and record-low resident move-outs for home purchases.

  • Dream deferred: U.S. renters are becoming increasingly pessimistic about buying homes, with only 4 in 10 thinking it's still possible, as prices and mortgage rates keep rising.

  • Apartment slump: Apartment sales hit a near-decade low in Q1, with $16B in transactions marking an 86% drop from the multifamily peak.

🏭 Industrial

  • Power struggle: Data centers have to deal with expected power shortages in 18–24 months, warns DigitalBridge CEO, with $20B in projected capital expenditures for expansion.

  • Switching gears: Carling Technologies sold a 122KSF building in Plainville, CT, to Element 119 for $7.6M, or around $62.30PSF.

  • Gaining space: Blackstone's (BX) Link Logistics acquired a 93.9KSF industrial facility, leased to The Shade Store, for $20.7M.

  • Inland investment: Bixby Land Co. sold a 340K SF industrial facility in San Bernardino, CA, fully occupied by two tenants, to Dalfen Industrial.


  • Game on: The American Dream Mall in NJ is ready to unveil a 42KSF Hasbro Gameroom (HAS) in June, featuring arcade, dining, and nostalgia-themed games.

  • Brooklyn fair: The long-anticipated Brooklyn Fare Kitchen & Market opened after three years in limbo due to the pandemic, and is now the largest food fare in NYC.

  • Silent strings: After a century in business, Sam Ash, the largest family-owned music retailer in the US, closes its remaining 42 stores.


  • Here to stay: Bloomberg extends its 947KSF lease at 731 Madison Avenue by 11 years, starting in 2029 and ending in 2040.

  • Eager beavers: Major law firm Kirkland & Ellis filed paperwork to begin tenant improvements for their 90KSF lease at a 48-floor high-rise still being built in downtown Austin.


  • Record-breaking: Two Nashville hotels—1 Hotel Nashville and Embassy Suites by Hilton—were sold for a record $530M.

  • Hospitality hotspot: Dallas-based Braemar Hotels & Resorts (BHR) is strategically selling Hilton La Jolla Torrey Pines for $165M, aiming to enhance shareholder value.


Why You Should Invest in Texas Multifamily in 2024

BV Capital believes that multifamily ground-up construction presents a significant opportunity for investors today, as they expect a supply-demand imbalance to materialize in the Texas multifamily market come 2025.

Given the increased demand and new multifamily construction starts currently stifled across the state, projects that manage to get off the ground now will be there to meet that demand — and even benefit from higher rental rates. 

Past performance is not indicative of future results.


Massachusetts Considers Mansion Tax for Affordable Housing

Massachusetts Eyes Mansion Tax to Fund Affordable Housing

The MA State House in Boston. Photographer: Phil Roeder/Moment RF/Getty Image

Massachusetts is dividing national opinion on housing affordability with a proposal to levy a tax on high-value property sales to address the state's growing shortage of affordable housing.

The proposal: Governor Maura Healey's $4B housing bond bill includes a provision that would allow MA cities to impose a transfer fee ranging from 0.5–2% on property sales exceeding $1M. If passed, this tax could play a crucial role in funding statewide affordable housing projects. Supporters view this as a necessary measure to combat the housing crisis and ensure local renters and homeowners aren’t priced out.

Critics, concerns: Some argue that the proposed transfer fee could further burden CRE developers, who are already facing high vacancy rates for offices. Imposing additional taxes on property sales might lead to lower real estate tax revenues and worsen current economic challenges.

Local perspectives: While there are valid concerns surrounding the proposed MA mansion tax, local officials in Provincetown and Easthampton view the proposed tax as an invaluable tool for addressing local housing affordability issues. By redirecting revenue to housing trusts and affordable initiatives, many cities hope to incentivize new housing creation while supporting mental health assistance programs.


Potential impacts: The residential market in MA is tight, with high mortgage rates deterring homeowners from selling. Despite over a 9% YoY gain in the median home sale price in March, transaction volumes have fallen by almost 8%. Of course, the CRE landscape is significantly more distressed, and the proposed mansion tax—which seems to have come at the worst possible time—could easily stifle already struggling commercial property owners.


DLA Piper’s 2024 Real Estate State of the Market Survey of CRE leaders revealed that 37% of respondents are bullish on CRE over the next 12 months—but 63% are still bearish. This is a notable improvement from the last survey conducted in mid-year 2023 when 86% of respondents were bearish.

Additionally, 53% of respondents believe that data centers offer the best risk-adjusted opportunities over the next 12 months, followed by multifamily (43%), logistics (38%), industrial (37%), and senior housing (30%).

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