CRE investment appetite is gradually starting to improve. In fact, healthcare-focused REIT Sila Realty Trust has noticed an increase in outpatient medical volume, especially in the months since it went public.
This comes as trading in general has declined “pretty significantly” over the past 12 to 24 months, said Chris Fullhouse, the company's executive vice president and chief investment officer, speaking at Globecent's annual conference. That's what it means. This year, the healthcare panel will be held in Scottsdale from December 2nd to 3rd.
“We feel like that trend is improving because of the health care system,” he said.
“From a developer perspective, development has stalled given that some banks have been capital-constrained, in fact since the beginning of 2022, so there are opportunities to fill that void. It’s starting to show up again.”
Fullhouse added: “The market needs capital.”
“We are beginning to see the need to reinvest capital into the business and repay debt,” he explained.
“Rising construction costs (and) a capital-constrained environment has really constrained supply in the market, so we're seeing an increase in developers seeking capital, similar to some of the deals we just announced. I am.”
So far this year, Sila, which invests in a wide range of health care assets, excluding skilled nursing facilities and senior housing, has completed approximately $180 million worth of transactions, Full House said.
sunbelt and opportunity
Although Sila maintains national scale, the majority of the REIT's assets (65 percent) are located in the Sunbelt. Now, Flouhouse is “all in” on the CRE opportunity. But it's not just specific regions that are important; fundamentals are also important.
“We are focused on working with the right operators in the right health systems with solid credentials,” Fullhouse stressed.
Cilla plans to continue its offensive on the acquisition front, which has amounted to approximately $165 million since the beginning of the year. Most recently, we closed on two mezzanine loans for the development of inpatient rehabilitation and behavioral facilities.
“We have the ability to take on the entire capital structure, including preferred investments and structuring mezzanine debt,” Fullhouse said.
“What’s important to us is that we have the option to purchase upon completion.”
Looking ahead to 2025, Fullhouse also expects transaction momentum in the healthcare sector, including outpatient medical volumes, to continue.
“Looking ahead, we expect the level of activity in the healthcare acquisition market to exceed levels seen over the past four quarters,” he concluded.
