REAL ESTATE - RREEF and NexCore Group have created a joint venture to invest $500 million in medical office buildings.
A specific equity allocation for the venture has not been decided. The relationship will be handled on a deal-by-deal basis. Denver-based NexCore will search the market for investment opportunities. When a deal is located, RREEF and NexCore will agree the investment prior to closing.
NexCore managing director Peter Kloepfer said: “Institutional investors are coming to the realization that medical office buildings have less leasing risk and are less cyclical than suburban office buildings. The average physician stays in a medical office building for 11.5 years.”
RREEF will be committing capital to the joint venture on behalf of one of its commingled funds.
The investment strategy is to acquire, renovate and develop the buildings. NexCore figures that 50% of the deals will be the purchase of existing assets and the balance will be in new developments.
One property has already been acquired. The Dry Creek Medical Campus facility in Englewood, Colorado cost $24.8m. The property is a care centre covering 11 acres.
Other transactions should close soon including two properties in Chicago and one in Colorado. The total investment in these deals is $85m.
RREEF and NexCore will be looking for investments around the country. They will consider single assets and portfolios and are aiming for an 8% to 9% leveraged IRR based on a long-term holding period.