Nationwide Health Properties Inc. (NHP), a real estate investment trust (REIT) that invests in health care facilities, recently acquired five medical office buildings (MOBs) in California from Pacific Medical Buildings LLC. Pacific Medical specializes exclusively in the development and management of MOB, outpatient facilities and parking structures for hospitals, medical groups and universities.

With the deal, Nationwide Health acquired 590,000 square feet of health care facilities. The aggregate transaction value is $211 million. The initial NOI (net operating income) yield from the properties, excluding a 190,000 square feet facility in Pasadena, California, which is in lease-up stage, is expected to be 7.6%.

Nationwide Health has continually focused on acquisitions to fuel its growth engine as demand for health care facilities is set to increase with an aging Baby Boomer generation. Furthermore, the health care sector is one of the more recession-proof real estate sectors and has persistently fared better than other sectors during the commercial real estate downturn. This offers a strong upside potential for the company.

Furthermore, Nationwide Health is structured as a triple-net lease health care REIT, which includes base rent (a regular income in the form of rent payments), preset thresholds (much like retail percentage rent clauses), and financing options (in the form of mortgage loans). The base rent and preset threshold agreements help eliminate operational risks, which are transferred to the lessee. The lessee also benefits by obtaining operational control and a larger share of profits without investments.

Zacks Investment Research

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