AEW Capital, Montecito Seal $245M Recap on Medical Office Portfolio

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A joint venture between AEW Capital Management and Montecito Medical Real Estate has closed a $245 million recapitalization of a 31-property medical office building portfolio across 10 states, Commercial Observer has learned.

JLL Capital Markets facilitated the deal after Montecito, the portfolio’s owner, approached it to find a recap partner, with AEW emerging from the process. The JLL health care capital markets team of Senior Managing Director Ted Flagg and Managing Director Andrew Milne led the recap with support from Vasili Davos, Kristina Patrk and Niema Beglari.

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“This is a reflection of a continuing trend we are seeing across asset classes with the sponsor electing to continue to create value and grow [assets under management] which in turn grows their enterprise value,” Flagg said in a statement.

Following the recap, BMO Harris Bank supplied $176 million of acquisition financing to the new ownership group. The acquisition loan was arranged by JLL’s Daniel Turley, Timothy Joyce and Anthony Sardo alongside Beverly Woodall and Drew Perry.

Healthcare Real Estate Insights first reported the acquisition portion of the financing.

The portfolio consists of 27 single-tenant and four multi-tenant buildings aligned with major health systems and physician groups. Eighty-one percent of the portfolio offers critical infrastructure, such as ambulatory surgery centers or imaging facilities.

Overall occupancy of the portfolio is near 100 percent with average remaining lease terms of 10 years, according to JLL. More than half of the assets are located in the Southern U.S., including the metro areas of Atlanta, Charlotte, N.C., and Miami, which have all benefited from recent migration trends.

“This portfolio provided a tremendous opportunity for BMO to partner with two world-class healthcare companies, in AEW and Montecito,” Ryan Stewart, BMO’s director and head of healthcare real estate, said in a statement. “Our execution on this transaction illustrates our continued commitment to the healthcare real estate space.”

AEW and Montecito did not immediately respond for comment.

Andrew Coen can be reached at acoen@commercialobserver.com.