Does Size Matter? A Medical Perspective

Yes, but not the way you’re thinking. Going small is all the rage in healthcare real estate, and one boutique MOB acquirer is giving REITs a run for their money.

Since its inception in ’09, Stage Equity Partners has bought $80M of medical office (400k SF), partner and avid hockey player Russell Brenner (center, no helmet) tells us. Now the market's getting frothy (Silver Tsunami, blah blah), with the usual suspects (REITS, private funds) driving up pricing with their low cost of capital. Stage Equity’s mission traditionally was to target assets the biggest players would avoid, due to their small size, geography in a secondary market, or off-campus location. But REITs and funds that wouldn’t glance at a $10M deal are now turning to smaller plays because they have nowhere else to go. (It's like when seniors start dating freshmen. Not that we're bitter.) So we asked Russell, is it time to find the next wave?

Not when opportunity’s knocking, he tells us. The nimble firm can easily shift from a long-term holder to a seller, giving the 800-pound gorillas the product they’re hungry for. (They sold one asset last year and are unloading two more.) And there’s still enough out there for the handful of deals the company needs to grow, Russell says, especially in distressed and off-market opportunities. After closing out 2013 by purchasing medical office buildings in the Fort Worth (above) and Atlanta metros (totaling over $11M), the firm’s targeting five to six more properties this year with an average deal size of $10M. (They focus on the Chicago area, Mid-Atlantic, Southeast, and Texas markets.)