Real Estate Consortium’s Hindermann Sees Opportunity In Local Medical Real Estate Market
METAIRIE, LA – Lane Hindermann, owner and broker of Real Estate Consortium, is licensed in Louisiana and Wyoming. She specializes in retail, medical and office sales and leasing. Working as a full time commercial practitioner since 1983, she has represented transactions for local, regional and national tenants for office, medical and retail space ranging from 800 to 100,000 sf., and has represented both seller and buyer for acquisitions of general and medical office buildings with value points up to $10,000,000.
She said medical real estate is a sub-specialty that remains the same, yet has its own inward and outward cycles.
“The current flow or outward cycle of medical real estate comes with suburban sprawl including the resurgence of downtown living,” Hindermann said. “Adding in the factor of population shifts and growth, like the millennials, there are more people that need and will need healthcare in some form or fashion, not to mention the 10,000 Baby Boomers who turn 65 every day in our country. There were 5.3 million that signed up for Medicare in 2015 and 17.6 million in 2016. This demographic has a continued life expectancy of another 20 to 30 years. Many national and regional health providers are capitalizing on this opportunity to expand across the country. They need real estate to buy and lease.”
Hindermann, a graduate of the Realtors Institute; a past board member and president of the Commercial Investment Division of the New Orleans Metropolitan Association of Realtors; a recipient of the Service to the Industry; recipient of the Women of the Year Award; and multiple recipient of the CID Achievement Award for high volume of closed commercial transaction, said more hospitals, hospitals systems, medical related services and physicians are needed to support this increasing population and the communities that are being formed.
“The hospital system, Tenet Healthcare, came into and out of this market between 2000 and 2005,” she said. “In that period, they acquired hospitals, medical office buildings and expanded their presence all over the metro market with primary health care and specialty clinics. They employed physicians and bought out other practices.”
Hindermann said hospitals are the driving force and nucleus of a medical real estate market. “No longer do you see stand-alone hospitals, except for East Jefferson General Hospital which is the only one in the metro area,” she said. “Just in our area we have Ochsner Health Systems with six hospitals; Louisiana Children’s Medical Center (LCMC) second only to Ochsner, which encompasses Children’s Hospital, Touro Infirmary, New Orleans East Hospital, West Jefferson and University Health Center; Paradigm Health system; and then there is the Partnership between HCA and Tulane with three hospitals. These hospitals have on-campus Medical Office Buildings (MOBs) that house physicians and services. When these on-campus MOBs can no longer support the needs of the physicians and related services, the hospitals start acquiring surrounding properties. These off-campus MOBs are leased for medical purposes thereby becoming income producing.”
More physicians and services have been needed, and outpatient surgery centers, blood labs, diagnostic imaging centers, urgent care centers and emergency rooms are now under construction and strategically located in neighborhoods to support the demands and needs of the surrounding population, Hindermann said.
“Where retail may be moving 10 to 20 percent of its sales online, medical still needs and will need ‘bricks and mortar’ to support and service the medical needs of its communities,” Hindermann said.
“The ebb or inward cycle of medical real estate comes with insurance,” she said. “I am sure some remember that you used to pay your physician before you left his office. You would take your receipt and file it with your insurance company. It was tough dealing with the insurance companies, but it had a rhythm to it. Then the federal government put in place ‘managed care,’ which meant that doctors’ offices had to file medical receipts and deal directly with the insurance providers for coding and the filing of forms and claims only to render a decrease in their reimbursements. When managed care came around, doctors started leaving their off-campus offices and headed to the hospitals and their on-campus MOBs, not only to lease but to become employees of the hospital or to sell their practices to the hospital. The practices would need more staff, more support and larger offices. Properties emptied, doctors either became employees of the hospitals or tried to partnership with other physicians without taking on more space. So, that meant vacancies increased in the off-campus MOBs, and so the cycle continues.”
Hindermann said after a while physicians changed their minds about being employees of hospitals, and while the rhythm of managed care was there, doctors, once again, started out on their own, buying and leasing properties. The occupancy of off-campus MOBs filled up resulting in diminished supply and an increase in rental rate, she said. Then came the investors who recognized the advantage of owning off-campus medical office buildings.
“The ebb comes again with the Affordable Care Act,” Hindermann said. “Doctors panicked. They saw insurance reimbursements decreasing again with expenses increasing particularly with digital filing systems. They saw doom. Once again, they headed back to the hospitals and many became employees again. Real estate changes again. As the rhythm returned, most doctors and hospitals gradually began working within this system. After selling their properties, some retired and some moved to other cities to work under contract at hospitals. The cycle continues.”
Hindermann said during the next flow cycle, the younger specialty physicians, such as plastic surgeons, neurosurgeons, dermatologist, radiologist and retina specialists, just to name a few, began heading out on their own. They no longer felt the need to be connected to the hospital for protection and they began seeing the benefits of owning their own real estate to house their practices and maybe a few others, she said.
“Physicians started buying and converting properties into surgery centers and medical facilities,” Hindermann said. “A bank building was converted into medical, and there is a veterinary hospital building being purchased and converted into medical. Just in 2016, two buildings with 40,000 sf. of medical office space were built in Metairie. One was developed for physician use with added space for additional medical tenants and the other for an investor who wanted medical tenants. They were leased within six to eight months at rental rates and lease structures that were new to the market.”
Hindermann said there is another part of the medical real estate category that has become one of the largest investments in the country – medical office building acquisitions, both on and off hospital campuses, to private investors and to real estate investment trusts (REITS). She said there are more than 30 Healthcare REITS in the country that specialize in the acquisition, financing and management of medical office buildings both on and off hospital campuses. In addition, there are national real estate brokerage firms that either specialize or have departments that specialize in healthcare sales.
“Real estate is an exciting and extremely demanding occupation,” Hindermann said. “To succeed you must be a self-motivated professional. This sector of my real estate profession has kept me guessing, learning and watching every ebb and flow in this market and what affects it will have. During these 40 plus years, I have rendered the advisability and the feasibility of purchasing and/ or leasing. There has also been the role of obtaining market analysis, feasibility studies and appraisals that were to be used in the decision-making process; all to aid in the service of interpreting specific requirements and information imperative in this lengthy process of buying or leasing medical real estate. Healthcare organizations, physicians, medical related providers all need this service. They all need real estate.”