Foreign investors are increasingly looking to invest in medical office real estate in the United States—and to invest in a big way, according to a recently released report from Fitch Ratings.

In fact, many of these foreign investors are looking to enter the U.S. with initial investments worth $1 billion or more, experts believe. The capital providers in question have longer-term horizons, and include pension funds, sovereign wealth funds and insurance companies, Fitch notes.

U.S.-based real estate investment trusts (REITs) have taken notice of this new trend. Healthcare Realty Trust (NYSE: HR) Executive Vice President of Investments Todd Meredith, for instance, mentioned increased competition from foreign capital sources and sovereign wealth funds during the company’s third-quarter 2016 earnings call on Nov. 3.

“You’re seeing a lot of interest,” Meredith said. “I don’t think we’ve seen a huge move by any of those parties yet, but certainly in healthcare you have, and MOBs are certainly something they’re looking at.”

These foreign capital sources are all looking to enter at a “pretty massive scale” and desire the potential to grow.

“What we’re hearing is in the billions, $1 billion, $2 billion as the starting point and the ability to grow from there,” Meredith said.

Still, there are few large portfolios in the market that have yet to trade with scale being emphasized more than quality, Meredith said. These portfolios are being marketed primarily by financially oriented sellers who want to take advantage of a low cap rate environment or are seeking liquidity events, he explained.

“While we would normally expect cap rates for these portfolios to be less aggressive due to weak alignment with health systems, inferior locations and generally smaller, we may see new investors bid up the properties to achieve scale in the MOB business,” Meredith said.

More institutionalization of health care real estate is a credit positive for REITs because it improves finance ability and asset liquidity, the report says. It’s possible, however, that less-seasoned buyers emerging as the highest bidders could indicate peaking values and an aging cycle, Fitch noted.

Written by Mary Kate Nelson