MOBs Might Offer Hedge Against Inflation

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New report by economist Gary Shilling, underwritten by ULI and Seavest Inc., says medical office buildings will benefit from healthcare industry’s long-term stability

The Outlook for Health Care

The same factors that provide the opportunity for our communities to make healthcare a cornerstone of economic development also argue in favor of the investment potential of healthcare real estate.

In the wake of the financial crisis, the recession and a year of contentious debate regarding reform, the future of the healthcare industry would appear to be uncertain.

But a new report from nationally known economist and investment advisor Dr. A. Gary Shilling suggests that healthcare will actually be one of the strongest and most stable industries in the years to come – a prediction that bodes well for those who invest in medical office buildings (MOBs) and other healthcare real estate.

The report, “The Outlook for Health Care,” was prepared for the Urban Land Institute (ULI) with the support of Seavest Inc., a White Plains-based investment firm that specializes in healthcare real estate. The report was discussed at a recent ULI forum in Washington.

In the report, Dr. Shilling predicts that “the demand for medical services in the United States will mushroom in the coming decades” due to the aging population and newly insured Americans who will be covered as a result of healthcare reform. At the same time, Dr. Shilling says that healthcare delivery strategies must change to account for other industry trends, including technological advances, mergers and acquisitions among hospitals and health systems, and a shift toward employed – rather than independent – physicians.

The net result, Dr. Shilling concludes, will be a widespread need for new and refurbished MOBs and related outpatient care facilities such as emergency departments, surgery centers, imaging centers, cancer care facilities and wellness centers.

The unique characteristics of the healthcare industry – including its demographic underpinnings and robust government support – will be stabilizing factors for associated real estate markets, Dr. Shilling says. Thanks to that stability, healthcare-related real estate will offer an excellent hedge against inflation, he adds, although conditions will vary across geographic markets depending on local socio-demographics, as well as the evolving market of healthcare providers.

“The same factors that provide the opportunity for our communities to make healthcare a cornerstone of economic development also argue in favor of the investment potential of healthcare real estate,” Seavest Executive Vice President Jonathan Winer said at the recent ULI event. “Facilities of all types, but particularly medical office buildings and specialized outpatient facilities, will be needed as healthcare providers build out their networks and organized to provide cost-effective healthcare.”

“Healthcare providers will look to investors to help fill this real estate need, and the fact is that these properties have proven to provide reliable cash flow and investment returns and to perform well during both good and bad economic times,” Mr. Winer added.

For a complete copy of the report, please click here: The Outlook for Health Care.

About the Urban Land Institute

The Urban Land Institute (http://www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.

About Seavest Inc.

Established in 1981, Seavest Inc. is a real estate investment management firm focused on funding the development of, acquiring and asset managing healthcare real estate assets. A pioneer in this sector, Seavest made its first healthcare real estate investments in the mid-1980s. Today, the firm controls a significant portfolio of medical office space and manages three healthcare real estate investment funds. For more information, please visit http://www.SeavestHCP.com or call (914) 683-8474.

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