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Real estate developers form joint venture to build rehab, behavioral health hospitals

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Real estate developers Hicks Ventures and Artemis Real Estate Partners signed a $100 million joint venture to develop around 20 inpatient rehabilitation and behavioral health hospitals, the companies announced Thursday.

More real estate developers and investment firms are focusing on the post-acute and outpatient sector as the population ages, interest rates remain low, reimbursement trends shift and technology advances. Houston-based Hicks Ventures also has a post-acute facility with an in-patient dialysis suite in the pipeline.

"As the post-acute and behavioral health markets continue to expand rapidly, this joint venture with Artemis Real Estate Partners will allow us to develop 18-20 hospitals or about $400 million worth of projects to add to our portfolio," Larry Vaile, director of healthcare & principal of Hicks Ventures, said in a news release.

There has been a significant uptick in third-party healthcare real estate development projects, which make up 42% of current developments, according to a recent analysis from advisory firm H2C Securities. Construction costs were up about 18% as of late last year, and third-party developers can generally build more efficiently than health systems, H2C experts said.

"High demand and a bottleneck of supply (for medical office buildings) has accelerated investors' appetite for alternative healthcare real estate assets," H2C wrote in its September report. "Additional post-acute care assets such as inpatient rehabilitation hospitals, behavioral health hospitals, and others are now being looked, at with an abundance of dry powder capital waiting to be deployed in the market."

Hicks Ventures will break ground in March on a 53,000-square-foot post-acute facility with 42 beds and an inpatient dialysis suite in Wausau, Wisconsin. The firm sold three fully leased inpatient rehabilitation hospitals to Medical Properties Trust and MedProperties last year for $86.8 million.

Hicks Ventures has completed more than $1 billion in healthcare development projects over the last 20 years, including six acute-care hospitals, seven inpatient rehabilitation hospitals, eight long-term acute care hospitals and nine medical office buildings.

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