KKR-managed fund KKR Real Estate Select Trust (KREST) has acquired a portfolio of core medical office buildings and ambulatory surgery centers located in seven Sun Belt states.
The portfolio was assembled by Montecito Medical and FCA Partners, a real estate investment management company.
The transaction will recapitalize the portfolio with Montecito Medical retaining its interest in and operational responsibility for the properties.
The purchase marks KREST’s first acquisition of core healthcare real estate assets, further diversifying the fund’s portfolio following its recent first-time multifamily property investment, as well as its first international property acquisition.
The portfolio consists of 15 outpatient medical office buildings and ambulatory surgery centers totaling approximately 400,000 square feet. The properties are located across the southern United States in growth submarkets within Arkansas, Florida, Georgia, North Carolina, Tennessee, Texas and South Carolina. The Portfolio is over 99% leased to a mix of leading investment grade health systems and specialist medical groups in practice areas including orthopedics and ophthalmology, with a weighted average lease term greater than 10 years.
“We are pleased to invest in mission-critical real estate for a premium group of tenants who are providing in-demand medical care to high-growth communities across the Sun Belt,” said Peter Sundheim, a senior leader on KKR’s real estate team. “We believe these properties operated by Montecito Medical are positioned to benefit from long-term trends in healthcare and population growth, making them a great match for KREST.”
“This transaction places our Southern Core Medical Office Portfolio in the hands of a great long-term owner with deep expertise across healthcare and real estate sectors,” said Chip Conk, Chief Executive Officer of Montecito Medical. “We are happy to deliver a great outcome for our investors while continuing to maintain and grow our operational platform.”
“This acquisition represents a meaningful diversification of our KREST investment portfolio, and we are thrilled to expand the portfolio with new exposure to healthcare real estate,” said Billy Butcher, Chief Executive Officer of KREST and Chief Operating Officer of KKR Global Real Estate.
“We appreciate the great work of our partners at Montecito Medical in assembling this portfolio of quality medical office assets,” said Al Lindemann, Managing Partner of FCA Partners. “We continue to believe in the long-term value of medical office assets as part of our client portfolios.”