Healthcare

Medical Outpatient Buildings — (“MOBs”), or what’s referred to in the industry as “Outpatient Facilities,” is where physician and related practices are located and the vast majority of day-to-day healthcare is delivered in the U.S.  This can be in an “on-campus” hospital setting, immediately across but pedestrian to a major hospital, or off-campus typically in a more convenient location for patients and their healthcare providers.  These buildings are typically purpose-built with specific mechanical infrastructure needs, larger floorplates, high parking ratios for patients and highly-specialized build-out within each suite.  Due to the very resilient nature of the tenants, high switching costs for tenants to depart an existing space, and structural barriers to entry limiting new supply, Virtus generally considers Outpatient Facilities to be the most resilient of all commercial real estate sectors.

Senior Living properties can include the entire care continuum from age-restricted apartments for lifestyle-oriented seniors to high acuity skilled nursing and hospice care. This array includes myriad different risks, tenant demand, and operational profiles.  The most investable segments are age-restricted apartments (“Active Adult”) and private pay needs-based properties, specifically Independent Living, Assisted Living and Memory Care, typically with all three levels of care available in the same setting.  All are joined by the immense demand wave the Baby Boomer generation poses. While conventional MOBs are already serving elevated care demands as Baby Boomers age over 65, the higher typical ages-of-entry for needs-based senior living mean the space is only now beginning to approach its prime years. However, the needs-based sectors require special attention and diligence, due to rising labor costs and disrupted leasing patterns from the Covid pandemic.

Specialty Healthcare generally refers to properties whereby healthcare delivery is taking place, but is generally distinct from typical MOBs or Outpatient Facilities.  This may include but is not limited to behavioral health and Inpatient Rehab Facilities (“IRF”).  These burgeoning segments demonstrate strong growth potential due to the rise in awareness and needs around mental health and the push for more cost-effective settings in which to heal, such as in IRFs.

Life Sciences refer to biopharma, biotech, and related industries, and properties comprise everything from lab space and manufacturing to corporate offices and distribution space for bioscience tenants. Despite the transformational potential of biosciences and research during the next century, this space is highly complex, and responsible investment requires awareness of regulatory, macroeconomic, and scientific forces bearing on the sector. Life sciences real estate tends to be clustered around major research universities, which form the start of the biotech pipeline. Tenant credit quality varies highly, from early stage startups to household biopharma names.