Health care, development’s bright light, still shines despite credit woes

The Saint ReportHealth Care, Saint Consulting Links, saintblog1 Comment

By Tom Ahern,
Senior Vice President, The Saint Consulting Group

health careMuch has been written, spoken and ruminated lately on the implosion of the US commercial property market. More specifically, many retail and commercial developers are just hoping to keep their heads above water until 2010 when, they hope, the US has pulled out of recession, and consumers are buying towels, video games and other consumer goods.

If there is a bright light of the property development industry right now, health care may be one of the leading contenders for the crown. The combination of an aging baby boom population, continued growth in outpatient specialty surgeries like hip replacements and knee/shoulder arthroscopy and growing need for cardiology services like angioplasty, are still fueling the development of medical office buildings and hospital expansions.

At the recent Interface Medical Office conference in Chicago, speakers gathered to discuss the current state of the industry and how best to navigate the increasingly difficult credit markets to ensure capital is available to developers.

Certainly the past 12 months have been a rough time for developers of medical office and hospital projects to acquire permanent financing for their projects. In a prior post, I detailed hospital projects that have been shelved or postponed on account of dwindling or disappearing capital.

Many medical-related projects today are acquiring their funding from pension funds, life insurance companies, community banks (many of which are not saddled with sub-prime mortgages) and patient private equity investors. One panel of debt and equity investors signaled that the credit risk of a project — when or if it will get built — is a prime consideration for financing in these times.

Still, there are some bright lights in this industry. As noted, the appetite for outpatient surgery remains high. For many hospitals and doctors networks, these procedures provide high margins that offset the dwindling state and federal Medicare and Medicaid reimbursements. Additionally, medical office projects seem to encounter less public opposition from local communities, further enhancing their attractiveness as a viable development opportunity.

The Saint Report wants to hear from medical office and hospital developers — what has been your recent experience with getting local approvals?

Tom Ahern is senior vice president for capital markets and health care, The Saint Consulting Group, email: ahern@tscg.biz phone 781 836-4343

One Comment on “Health care, development’s bright light, still shines despite credit woes”

  1. CJ Follini of Noyack Medical Partners on GlobeSt TV, discussing current state of medical office market. As discussed, is MOB the lone bright light in development? CJ was a featured panelist at the recent CHicago Interface Medical Office conference- http://tinyurl.com/p5us53

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