Anchor Health Properties is a real estate investment firm with holdings surpassing $1 billion in the healthcare space.
Anchor Health Properties CEO Ben Ochs and CIO James Schmid spoke to Becker's ASC Review about the company's approach to investment, how Anchor plans to stay competitive in an increasingly competitive space and what's in store for the real estate firm five years down the road.
Note: This has been lightly edited for style.
Question: What's Anchor's philosophy when approaching transactions?
Ben Ochs & James Schmid: Anchor Health Properties’ investment platform motto is to ”protect the downside and solve for the upside.” This motto has helped guide us to reach $1 billion in transactions since launching the investment platform in July 2016. As a national, full-service healthcare real estate firm, an important aspect of our investment thesis is to pursue assets with tenancy ecosystems that foster cross referrals across practices. This strategy generally enhances and ensures tenancy retention within acquired assets.
Our investment team focuses on the following when sourcing new acquisition opportunities:
- Modern health systems or large physician practice-anchored buildings
- Markets where we either have preexisting relationships and management scale or can do so quickly through other investment opportunities
- Top 50 MSAs with strong demographic growth
- Investments of size $10,000,000 and up, and/or 30,000 square feet and up
- Buildings in markets with high physical and regulatory barriers to entry
- Markets with strong and growing demand for healthcare services
Q: After purchasing a property, what can a tenant expect in terms of service changes?
BO, JS: Tenants can expect high-quality customer service and personal attention from a national, healthcare focused real estate firm offering extensive asset management and property management experience.
Anchor dedicates specific asset managers, property managers and engineers to each facility and encourages frequent interaction with building tenants. Our property management team operates from a partnership basis with our clients, spending significant time in our properties, utilizing technology to ensure efficient response times and investing in relationships. We understand their needs and strive to be vital piece of their organization, being strong advocates for facilitating best in class healthcare services in every facility.
Our asset and property managers are typically assigned less square footage and tenancy than our competitors, which in turn results in our team having more availability for high-quality interactions with each tenant. Our property management operations often benefit from economies of scale in markets where we operate as well as having shared resources and in-house expertise from Anchor’s complementary development, construction management and investment teams.
Q: Between management companies and increased PE activity, healthcare transaction activity is rapidly increasing. How do you plan to compete in this environment?
BO, JS: Anchor’s investment strategy focuses on maximizing scale in a core set of markets rather than trying to have a presence in every market. We continue to work with patient, efficient, low cost equity capital to make investments and utilize deep industry relationships, and management and development channels to pursue creative off market investment opportunities.
Q: Following that, in terms of supply and demand, as healthcare continues to consolidate, could there ever be a time the market is too consolidated? How will companies operate in that case?
BO, JS: Medical office supply is naturally constrained by pre-leasing, with a significant commitment from a health system or large physician practice to serve as a building anchor being required. Pre-leasing requirements, combined with larger, bureaucratic systems, often result in long lead times for new projects to reach the market.
Creating sector scale in medical offices is hard to come by and is rewarded in the long-term. This approach rewards “blocking and tackling” to assemble piece by piece a high-quality medical office portfolio with good credit, locations and weighted average lease term.
To continue to survive, companies like ours need to keep growing across diverse and complementary business verticals. In our case, management/leasing, development and investments and/or branch out into related sectors such as post-acute and senior living – which is something that a few of our competitors have done.
Q: Five years down the road, what does Anchor look like?
BO, JS: We hope Anchor continues to remain true to our core values and accordingly continues to experience successful growth — from building our investment portfolio to retaining our workforce. We are looking forward to building further scale in our managed/leased space across the country and the continued professional development and strong leadership from key employees. We will continue to focus in our existing core markets and have opportunities to enter new markets through strong relationships and delivering consistent results for our investors and health system partners.