BGO buys 11-property surgery center portfolio across nine markets

BGO said Wednesday it has bought an 11-property ambulatory surgery center portfolio from a joint venture of Flagship Healthcare Properties and AEW Capital Management, 223,000 square feet that are fully leased across nine markets and land inside the firm's U.S. core strategy. The purchase price was not disclosed.

The map runs through Dallas-Fort Worth, Chicago, St. Louis, Nashville, Lakeland-Winter Haven, Columbia, S.C., Huntsville, Prescott, Ariz., and Kalamazoo-Portage, Mich., a list that leans Sun Belt without leaving the Midwest and gives no single metro the portfolio. The only property the announcement sizes, Tri-City Surgery Center in Prescott, holds 12,718 square feet with three operating rooms and one procedure room; across eleven assets, that implies buildings averaging around 20,000 square feet. CBRE's Chris Bodnar, Brannan Knott, Zack Holderman, Anthony Sardo, Cole Reethof and Jesse Greshin represented the sellers, and Goodwin Procter served as BGO's counsel.

BGO is buying the real estate and the management contract, not the operating platform. Flagship assembled the portfolio alongside AEW and will keep managing the properties for BGO; Michael Keating, BGO's managing partner, credited the sellers with assembling and stewarding the assets and said the firm looks forward to working with Flagship as it continues to manage on BGO's behalf. Retaining the seller as operator is the low-friction version of this trade: it hands BGO clinical management it does not have to staff, and the assembler, which presumably knows the tenants, stays inside the rent roll.

The specialty mix runs from ophthalmology, orthopedics and gastroenterology to ENT, podiatry, plastic and reconstructive surgery, pain management, urology and endoscopy, which grounds Keating's stated conviction that ambulatory surgery centers are an increasingly important part of U.S. health care delivery. Whether that conviction set the price is unknowable.

BGO has been assembling health care exposure one asset at a time, acquiring a medical office building in Riverview, Fla., in May and Lahey Medical Center, an outpatient facility in Londonderry, N.H., in January. It also partners with Anchor Health Properties to acquire and manage other properties around the country, so eleven assets in a single trade changes the count.

The exit route here runs differently from the one this publication tracked in September, when South Broward Hospital District paid $69 million for a 1980s Hollywood campus and the buyer of on-campus clinical product turned out to be the health system next door. A nine-market portfolio of surgery centers sold to a core manager that keeps the assembler on the payroll underwrites differently: the income has to clear as core real estate without a hospital system's balance sheet behind it. No price was announced, so the market gets no comp on that question until the next Flagship-assembled portfolio trades.