[Updated] Duke Realty May Sell $3 Billion Medical Office Portfolio

Duke Realty (NYSE: DRE) may soon exit the medical office space entirely, Reuters reported on Thursday, citing people familiar with the situation.

The Indianapolis, Indiana-based real estate investment trust (REIT) is working with investment bank Morgan Stanley to sell its medical office building portfolio, which could be worth up to $3 billion, the people said.

So far, the medical office portfolio has piqued the interest of health care-focused REITs, but there is no certainty the ongoing sales process will lead to a deal, the people added.

Duke Realty declined to comment on the matter to Medical Office News.

If the rumors are true, it makes sense that Duke Realty is considering a sale now, according to Revista Principal Mike Hargrave.

“MOB prices right now are really at an all-time high in terms of valuations,” Hargrave told Medical Office News.

Irvine, California-based health care REIT HCP Inc. (NYSE: HCP), meanwhile, hasn’t ruled out purchasing Duke’s medical office portfolio, HCP CEO Thomas Herzog indicated during a Monday presentation at Citi’s 2017 Global Property CEO Conference in Hollywood, Florida.

“Obviously, that’s a fabulous portfolio—a large one, a new one, and I would suspect that a whole lot of folks are going to take a look at that,” Herzog said.

HCP intends to expand its medical office portfolio in 2017, whether through an acquisition of Duke Realty’s properties or otherwise.

“It’s an area that we’ll continue to grow,” he said. “It’s obviously a large segment and one that we consider ourselves a bit underweighted.”

As of December 2016, Duke Realty owned 561 commercial properties in total, 86 of which were medical office buildings and 455 of which were bulk distribution industrial properties.

Written by Mary Kate Nelson