09 Aug 2021
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Real estate news
Nuveen Real Estate Launches U.S. Cities Office Fund and Acquires Healthcare and Life Science Portfolio for $620 Million
Acquisition Increases Nuveen Real Estate’s Ownership of Life Science Space to 4.5 Million sq ft and Medical Office to 1.7 Million sq ft
Nuveen Real Estate has recently closed on the acquisition of a 29-building national healthcare and life science portfolio for an aggregate purchase price of approximately $620 million from IRA Capital. Nuveen Real Estate is one of the largest real estate managers globally with approximately $134 billion of assets under management.
The transaction was spearheaded by Nuveen Real Estate’s newly launched U.S. Cities Office Fund (the “Fund”), which is part of Nuveen Real Estate’s Global Resilient Series of open-end, core investment funds. These unique funds aim to capitalize on long-term, structural real estate themes and demographic megatrends by investing in dynamic and resilient cities to achieve diversification, income and long-term capital growth. In the United States, these vehicles provide investors the opportunity to efficiently customize their core allocations across the four primary property sectors – Multifamily, Retail, Office and Industrial. This new acquisition will augment the Fund’s existing exposure to healthcare and life science assets through the addition of a credit-backed portfolio focused on healthcare.
The healthcare portion of the portfolio was acquired by the Fund alongside a strategic third-party institutional capital partner for $463 million. The 750,000-square-foot portfolio consists of 27 individual properties, diversified across healthcare facilities with varying levels of acuity and specialization uses, including medical office buildings, micro-hospitals, ambulatory surgery centers, and cancer centers. The portfolio was evaluated and underwritten alongside strategic healthcare partner NexCore Group who will manage the portfolio nationwide.
“This is a foundational investment as we launch the Fund and will provide immediate scale in a dynamic and growing sector,” said Bill Abramowitz, Portfolio Manager of the U.S. Cities Office Fund.
The diversity across markets, tenants, lease term and tenant business practices, provides both significant risk mitigation and stability. Portfolios with these attributes and scale are difficult to identify and secure, demonstrating Nuveen’s execution abilities.
The new acquisition provides the Fund increased exposure to the healthcare sector, which has been a steady performer through market cycles and the COVID-19 pandemic as it is less subject to work-from-home and other risks given the need for in-person interaction and services. The underlying healthcare industries have positive fundamentals that continue to require additional specialized operating environments. Nuveen expects these alternative office sectors to continue to outperform.
“With this transaction, Nuveen Real Estate’s healthcare real estate portfolio is well over a billion dollars. We have a goal to aggressively grow this sector over the near-term given the strong demographic tailwinds driving demand for quality healthcare space,” noted Andrew Pyke, Head of Healthcare for Nuveen Real Estate.
“As demographic and economic patterns continue to develop, we see increased healthcare demand in U.S. markets, including treatment, research and manufacturing. This will have an expansionary effect on the related real estate, including medical office and life science,” said Chad Phillips, Global Head of Office at Nuveen Real Estate. “Our firm has been investing in these spaces and continues to see compelling opportunities to deploy capital.”
The life science portion of the portfolio was acquired by TIAA’s balance sheet, commonly referred to as the General Account (the “GA”), for $158 million. The 420,000-square-foot portfolio is comprised of two life science properties located in Orange County, CA, and Madison, WI, both of which have emerged as significant life science clusters. The portfolio is 100% leased to three creditworthy tenants.
The acquisition is consistent with the GA’s strategy to increase its exposure to alternatives, specifically life sciences. The portfolio will build meaningful scale, increasing Nuveen’s already sizeable 4 million-square-foot life science ownership footprint.