The physicians who own Mount Kisco Medical Group”™s main campus in Mount Kisco weren”™t planning to sell their two-building property. That is, until they received an offer too good to refuse from a Midwest company looking to enter Westchester”™s hot health care real estate market.
Hammes Partners, a private equity firm in suburban Milwaukee that invests exclusively in health care real estate for institutional and high net worth investors, in December closed on its $43 million purchase of 90 and 110 S. Bedford Road from a physician-owned real estate company, Bedford RD Properties LLC. The two medical office buildings total 120,000 square feet of space, said Scott Hayworth, president and CEO of Mount Kisco Medical Group PC, an approximately 500-doctor multispecialty group practice with headquarters on the Bedford Road campus.
Hayworth and other physicians in the limited liability company in 2003 paid $22.5 million to acquire the property from a realty affiliate of Mount Sinai Medical Center in Manhattan. The accepted offer from Hammes Partners was 91 percent above the property”™s sale price 12 years earlier. The $43 million deal amounts to about $358 per square foot.
Hayworth said the steadily growing medical group will continue to occupy the campus buildings as a long-term tenant of Hammes Partners, as it did with the previous ownership.
“This does not affect group operations,” Hayworth said of the lucrative deal. “It”™s real estate owned by the physicians and it does not affect the group at all and it does not affect the group”™s patients.”
“We were not marketing the buildings,” Hayworth said. However, low mortgage interest rates and the fact that “medical real estate is a very active space” for investors drove the deal that brought Hammes Partners to Westchester, he said.
For the private equity firm in Milwaukee, the Mount Kisco deal is its second acquisition in New York, said Todd Kibler, a principal of Hammes Partners. The company, which invests only in outpatient facilities, in 2014 acquired a 106,500-square-foot medical office building in southern Nassau County on Long Island.
The firm last July announced the final closing of a $430 million health care real estate private equity fund. Institutional investors made capital commitments that far exceeded the company”™s original $300 million target, Hammes Partners said. The Mount Kisco acquisition represents 10 percent of the fund, Hammes Partners II LP.
“Health care real estate has performed consistently throughout economic cycles and we believe the macro health care industry trends present a compelling investment opportunity for institutional investors,”™ Kibler said when announcing the fund closing. “We are excited about our significant pipeline of attractive opportunities.”
In New York, “We are looking at others,” Kibler told the Business Journal. “We really like the New York market from a demographic standpoint and a real estate market. Westchester County certainly is” an attractive market for more investments, he said. “Mount Kisco”™s prominence in the market is very attractive to us.”
Westchester”™s changing health care landscape and the expansion of major New York City hospitals into the county brought another new investor into its medical office market ahead of Hammes Partners.
Healthcare Trust of America in 2014 paid $64 million for the 14-acre, 189,000-square-foot Westchester Medical Campus in West Harrison. The purchase price amounted to about $338 per square foot of office space. The seller, Florida-based ProMed Properties Inc., paid $53.3 million for the medical office complex in 2008.
Healthcare Trust at the time of the purchase noted the property “is part of a high-traffic regional medical corridor” in one of the wealthiest counties in the country and adjoins the new Memorial Sloan Kettering outpatient cancer center.
A publicly traded real estate investment trust in Scottsdale, Ariz., Healthcare Trust in early 2015 paid $28.8 million for 210 Westchester Ave., a medical office building adjacent to the buyer”™s West Harrison medical campus. The county”™s other prominent and fast-growing multispecialty group practice, Westmed Medical Group, leases that property.
On the Mount Kisco Medical Group campus, “We anticipate business as usual” with the acquisition, Kibler said. “Nothing is going to change” both for patients and physicians.
Unrelated to the property sale, change will come in February for Mount Kisco Medical Group. The physician-owned practice will rebrand itself as CareMount Medical as of Feb. 29 to reflect the group”™s growth as a regional health care provider with more than 40 locations in the Hudson Valley.
Hayworth when announcing the name change last fall said the 70-year-old group has become “a community practice with a regional presence and a national reputation.”
Mount Kisco or CareMount, either way they are national leaders in health care delivery.