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USAA Real Estate expands healthcare reach

The real estate arm of financial services firm USAA is teaming up with a Midwest healthcare developer as part of its expansion into the asset class.

USAA Real Estate Company, the real estate arm of financial services firm USAA, is expanding its healthcare reach beyond the Southeast through a partnership with HSA Commercial Real Estate’s healthcare real estate subsidiary, HSA PrimeCare, the firms said last week.

The joint venture plans to buy and develop a range of healthcare real estate such as medical office buildings, cancer centers and other specialty centers in 11 Midwest states. The groups’ first deal was the purchase of a 97,375 square foot portfolio of medical office assets in northwest Indiana and a Chicago suburb for an undisclosed price. HSA PrimeCare will manage the properties, according to a statement.

Rob Sult, USAA Real Estate’s healthcare portfolio managing director, noted that the first acquisition is the beginning of a multi-year partnership that will expand HSA PrimeCare’s current geographic footprint. He said the healthcare real estate market is currently fragmented, with real estate investment trusts owning about 10 percent of the national stock and the rest split among a broad cross section of private investors as well as health systems, creating opportunity for an investor such as USAA Real Estate.

“We see great opportunities to be a buyer and create value over time by collecting what is largely one-off assets into a portfolio,” Sult told PERE. “This is a sector with compelling demographics, because the aging baby boomer sector will be a voracious consumer of healthcare.”

He also said that 2010’s Affordable Care Act has prompted healthcare systems to look for ways to reduce the high costs associated with medical care, leading to more emphasis on delivering services in less expensive and more decentralized locations outside of hospitals.

Noting these trends, USAA began ramping up its healthcare real estate investment in March 2015 through a similar joint venture with Brackett Flagship Properties, a Charlotte, North Carolina-based healthcare operator. Before this partnership, which started with the acquisition of nine southeastern US assets, USAA Real Estate had only invested in a few ground-up medical offices. Sult said these small deals did not represent a significant investment for the real estate platform, which has about $15 billion in assets under management, according to its website.

“We are building a national presence through regional partnerships,” Sult said. “Between the two existing partners, we’re approaching 20 states of coverage. Now it’s time to move on to the next region and identify similar leading regional partners.”