CBRE GIP buys 95% stake in 25 medical offices

Kayne Anderson sold the portfolio, which it assembled from two of its opportunistic funds.

CBRE Global Investment Partners has purchased a 95 percent interest in a 25-building medical office portfolio from Kayne Anderson Real Estate Advisors, the groups said Wednesday.

Los Angeles-based CBRE GIP bought the stake through a combination of its funds and separate accounts for $510 million-$590 million, PERE understands. The portfolio, which is located across 10 states, is 95 percent occupied. Boca Raton, Florida-based KAREA and operator MB Real Estate Healthcare will continue to operate the 1.4 million square foot portfolio and jointly hold a 5 percent stake.

“We've been looking at the alternative real estate sectors, including medical office, for a few years now,” Matt Tepper, a CBRE GIP director, told PERE . “The thing we like about those sectors is that it provides good diversification to a commercial portfolio because they're less correlated with the macroeconomic cycle. They offer the ability to drive more stable income as we get later in the cycle.”

KAREA assembled the portfolio largely through its third opportunistic fund, with one asset coming from the second vehicle in the series. Kayne Anderson Real Estate Partners III closed on $750 million in 2013, while KAREP II closed on $575 million in 2011, according to PERE data. Investors in both funds included the Wyoming Retirement System, the Eisner Foundation and the Terry Foundation.

“This is exactly the profile of what we're doing across our portfolio: buying high-quality assets that are in transition and bringing our operating expertise to bear, typically going from low 80s percent occupancy to mid to high 90s,” KAREA's chief executive Al Rabil told PERE .

“What we're seeing today is a portfolio premium for high quality medical office assets. Even in a rising interest rate environment, we believe cap rates will stay relatively compressed due to the dearth of institutional quality portfolios and the recession resistant nature of the sector. There's tremendous demand among institutional investors globally for these assets.”

The portfolio deal was the first time KAREA and CBRE GIP transacted together, and both parties said they plan to work together on future medical office deals.

KAREA continues to make investments in the niche real estate sector. In May, the firm bought Sentio Healthcare Properties, a healthcare real estate investment trust, from private equity firm KKR in a deal valued at $825 million, PERE previously reported.

CBRE GIP is the real estate arm of CBRE Global Investors that invests with operating partners through primary funds, club deals, secondaries, co-investments and programmatic ventures. CBRE GI managed $98.9 billion in assets as of June 30, including CBRE GIP's $15.7 billion in assets.

KAREA manages $4 billion in assets, according to its website.