Writer: Max Crampton-Thomas
2 min read March 2021 — Flagship Healthcare Properties is a fully integrated commercial real estate firm focused on clinical outpatient centers. Its concentrated focus on these same-day treatment facilities has proven to be a strong and resilient business strategy as the company finished a record year 2020 despite the challenges presented by the pandemic. President and CEO Brannen Edge spoke with Invest: Charlotte about the company’s standing in the Charlotte market, and the opportunities specific to the region.
What are some of the main lessons learned from 2020 that will be applied to your business?
We have just finished a record year for Flagship Healthcare. The fact I am able to say that amid a global pandemic is a huge testament to our team and the industry we are involved in. We’re focused on clinical outpatient centers, which has proven throughout the years to be a resilient asset class. We are investing and managing those properties where medical care is delivered by a provider to a patient, limited to same-day treatment. We are not invested in longer-term care facilities. While the patient demographics are shared between those sectors, the risks are very different. With COVID, those risks were highlighted, as senior living facilities were among the hardest-hit during this pandemic. We learned how to adapt to circumstances we were certainly not prepared for. No matter the next unexpected event, we know we are able to pivot when the circumstances demand.
Despite the fact that certain procedures may be deemed elective, healthcare can be viewed as a consumer staple. Americans are living longer but they’re not necessarily living healthier lives. In the United States, specifically in the Southeast and Southern Mid-Atlantic region, our senior population is growing at rates even faster than the overall population. There are over 10,000 Americans who are turning 60 or older every day, resulting in an influx of demand in the region from people who need medical care. For 15-plus years we have been seeing this shift in healthcare driven by these demographics and the demand for outpatient healthcare because of the quality of care, convenience and cost-efficiency. Delivering care in an outpatient setting is more convenient for the patient, more cost-effective for the hospital systems and results in better outcomes and increased patient satisfaction.
What are some of the unique business opportunities Charlotte presents?
Flagship is headquartered in Charlotte. Our private REIT, which owns the properties in which we are invested, has 70 buildings valued at about $570 million. Forty-seven percent of our investment is in North Carolina, so it is clearly a very important location for us. We have great patient demographics, healthy economies and there are some amazing healthcare providers located here.
How has your investment strategy changed as a result of recent events?
A few things have gained in prominence because of the pandemic. Most of our tenants are frontline workers and in March there was a lot of anxiety and concern. It was impressive to see how those tenants adjusted and adapted, realizing they still had the duty to deliver care, whether it was pediatricians or dentists or orthopedic professionals. Some of the solutions involved generating new ways to see patients. Prior to COVID-19, some providers considered expanding waiting rooms. Once the pandemic hit, some began asking patients to wait in their vehicles until they received a text message. Others modified how their waiting rooms were designed to meet social distancing guidelines. Providers began using their space more efficiently.
We also saw a drastic rise in telemedicine. We were uncertain how that would impact our business. If people can access healthcare over Zoom, do they need medical office buildings? It turns out you do. Even though there has been a huge increase in telemedicine appointments, in-person appointments are still critically important. Telemedicine can act as an excellent supplement to traditional healthcare that increases a provider’s capacity to see patients for minor ailments and initial diagnosis. When it comes time for the cavity to be filled, the bone to be set, the scan to be completed or the vaccination to be administered, all is accomplished in person. This translates to more efficient and effective care and does not negatively impact our business.
What is your outlook for 2021 and what are your top priorities going forward?
The demographic changes are not slowing down at all. There were many instances of pause when capital investment was halted from many of the big healthcare providers. There is very much a race for market share, and we’re seeing pockets of demand for these products. At the end of 2020, we finished a property for UNC Health in the Triangle and we will finish another building for the healthcare system in Hillsborough in March. We have a new executive, Blake Bratcher, who is an expert in ambulatory surgical centers, which now account for more than half of all surgeries in the United States. That will be an area of focus in 2021 as we continue to invest in acquisition of surgery centers, develop the centers and invest in the management of these extremely specialized facilities that are essentially miniature operating rooms.
What are some market trends and factors to watch in the coming years?
As we evaluate our markets, we are invested in 10 states in the Southeast and Southern Mid-Atlantic region. We want to grow our investment across all those markets. Looking at submarkets, there are a lot of important factors, such as size, population growth, senior population growth, levels of insurance coverage, the number of healthcare systems and the presence of certificate of need laws. We also look at economic trends, including how unemployment rates will rebound and where they will lag. We’re looking closely at changes to the Affordable Care Act and how that will change the outlook. Generally, any development that expands access to healthcare is good for our business.
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