The rise of interest rates in the United States over the past three years ushered in a sudden end to what had been an active market the past decade for portfolio transactions in the US healthcare real estate sector. Healthcare real estate is an asset class that typically features smaller individual investment size on average (by institutional standards). A modern 50,000 square foot medical outpatient building might trade in the range of $20,000,000 - substantially less than say an apartment building, commercial office campus, or industrial warehouse.
The name of the game for developers and investors alike has been to develop and assemble thematic portfolios of scale over time and then allow the institutional market to reward this patient work with a “portfolio premium” to individual asset pricing at the time of disposition. Creating scale allowed institutions to make large initial sector investments without having to wait on the time needed for portfolio assemblage. The larger the transaction, the more likely it was that a buyer would need access to secured debt at the portfolio level to effectuate a portfolio acquisition and achieve appropriate risk adjusted returns. As interest rates rose, lenders shut off meaningful access to attractively priced portfolio debt through the first part of 2025, and accordingly, the market for portfolio transactions traded off as much as 90% versus its peak in early 2022.
Since early in 2025, lenders have increasingly returned to sector portfolio lending as interest rates began to moderate, and with more and more lenders having access to capital and a need to place it, loan spreads began to moderate as well. This is a significant factor in the return of portfolio transactions to the investment sale market in the healthcare real estate sector. The timing of this return happens to align with a desire of many current owners to test the market for portfolio sales at present. Investors looking to recycle capital, close out investment funds, and/or pay off expiring loans have had to wait on the return of meaningful debt capital to the market to resume portfolio disposition activity. The pent up need for disposition activity and recycling of capital has continued to build through 2025. There are additionally a number of new entrant investors into the US healthcare real estate sector as well, including a number of large foreign investors who have the potential to create a new market dynamic as active buyers of scale. By one count, there are now a dozen or more portfolios actively being pursued for disposition on a marketed basis as well as a handful of large off market portfolio pursuits. The second half of 2025 could see $4billion or more USD of portfolio sales close if things continue to track on that front. Such a sea change of investment volume would likely have a significant impact on the go forward investment sale market in 2026 and beyond.
Anchor will be studying the markets carefully during this time to evaluate the potential impact of such trades it the valuation of its assets as well as go forward disposition and recapitalization strategy. The winds of change have arrived, and the next several months should be interesting to see unfold!