This transaction marks the second U.S. debt deal with Nuveen Real Estate, following Allianz’s USD 94m financing of a six property industrial portfolio for the investment manager’s U.S. Cities Industrial Fund (“USCIF”) in 2020.
This transaction is significant for several reasons, not least for the unique nature of the loan and the size of the portfolio. The deal is structured on a 7-year term with both a fixed rate tranche for USD 163.8m (70%), a floating rate tranche for USD 70.2m (30%) and is the first of its kind provided by Allianz Real Estate in the U.S. and Europe. The loan will provide 51% of the total acquisition price of USD 462.9m, and the Sponsorship will have USD 228.9m of equity remaining in the transaction.
Totaling over 747,000 rentable sq ft, the portfolio represents 27 high-quality class A/B medical office properties geographically diversified across 13 states: Arizona, California, Florida, Illinois, Michigan, North Carolina, New Jersey, New York, Pennsylvania, Texas and Wisconsin. 20 of the 27 properties are located in CON states, in which local governments requires an extensive approval process to prove that there is a need for the development of new healthcare facilities in each location, providing high barriers to entry and regulatory restrictions around new supply.
The portfolio is 99% occupied by 38 tenants, of which 92% are investment grade credit healthcare systems. The portfolio rent roll benefits from a weighted average unexpired lease term (WALT) of 12 years, providing for a reasonable lease rollover profile (33% of portfolio NRA) during the loan term. The portfolio is well-diversified across traditional medical offices, urgent care centers, outpatient surgeries & specialty treatment centers, and specialty hospitals.
Mike Cale, Co-head of U.S. Debt, Allianz Real Estate, United States said: “This is a complex and innovative transaction that underlines our willingness to take a flexible approach to meeting the requirements of one of our longstanding, global partners.”
“Covid-19 has highlighted the need for improved efficiency and ease of access to healthcare, increasing demand for outpatient centers and higher-severity care space within hospitals. Medical offices thus represent a unique, resilient asset class poised to further benefit from strong fiscal tailwinds engendered by both the CARES Act and the U.S. small business stimulus program.”
“We are delighted to have completed this latest transaction ,” said Christoph Donner, CEO, Allianz Real Estate of America. “Despite the volatility seen over the last 12 months, Allianz Real Estate has substantially expanded its U.S. portfolio, reaching a record USD 21.6bn AUM at the end of 2020, spanning equity and debt. We look forward to building on our commitment to the region.”