Davis Medical Investors Eyes $250M Medical Office Portfolio
Mark Davis is the dean of medical office real estate in the Twin Cities. His Minneapolis-based firm Davis handles just about everything connected to health care real estate: leasing, development, strategic planning, property management, investment sales, and more.
Now Davis has launched a new investment fund, Davis Medical Investors LLC, to build a portfolio of medical office buildings – “MOBs” in commercial real estate parlance.
“We always really did individual asset partnerships,” said Davis. Under that model, Davis and a group of investors would own individual properties. “We started strategically thinking about how are we going to be competitive if we want to do it on a larger scale.”
Davis started working on the fund concept in early February. The fund closed on a $175 million loan from Capital One on Dec. 3, and then quickly closed on the acquisition of eight medical office properties within 10 days.
Altogether the portfolio has roughly 310,000 square feet of medical office properties.
Three of the properties are located in the Twin Cities, three are in suburban Nashville area, one is in Cincinnati, and another is in the Hartford, Connecticut area. Six of the buildings are 100 percent leased.
“We can create, with equity, about a $250 million pool of health care assets,” Davis told Twin Cities Business. “We closed the first eight for $112 million and we have quite a bit of capacity left. Hopefully we can grow it to 20 or more properties.”
The capital backing the fund includes both long-time Davis partners and an unidentified institutional partner.
Davis said that the fund had $37 million of equity invested in its first round of acquisitions. Although the fund significantly strengthens Davis’ position as an investor, he won’t be trying to outbid large real estate investment trusts (REITs).
“We’re never going to compete against the large REITs for larger portfolio purchases,” said Davis.
Instead, Davis and his group will be looking to acquire smaller portfolios of 1 to 3 properties owned by medical groups, developers or other investors.
While the Covid pandemic has brought challenges for office, retail, and hospitality real estate, the medical sector remains strong. Davis said that the fund is looking to make about $125 million in acquisitions next year.
“The appetite for health care assets hasn’t diminished at all,” said Davis. “We’ve got four or five deals that we’re actively looking at for 2021. We’re in a really good position to be competitive.”