Kayne Anderson Real Estate has acquired a $1.3 billion portfolio of medical office loans from Synovus Bank that spans 106 floating-rate mortgages across 308 buildings.
Andrew Smith, a senior managing director and the head of real estate debt at the Boca Raton, Florida-based manager, told Real Estate Capital USA the September 18 deal reflects an ongoing market trend of better-positioned banks looking to maximize their available capital or liquidity.
With regional banks contending with capital constraints, be it from interest rates, existing loan books, regulatory capital pressures or stress on deposits, Smith said there has been an inward turn to figure out which parts of a portfolio can be used to create liquidity, bolster balance sheets or deploy into opportunities with higher returns on income.
“That was really the case here,” Smith said. “Synovus looked at their book and, while their medical office loan portfolio had been very successful performance-wise with super high-quality loans, selling this portfolio will allow them to redeploy capital more efficiently.”
Sources familiar with the deal said Synovus approached a small group of potential buyers with strong capabilities in the medical office space and some level of relationship with the Columbus, Georgia-based bank when the portfolio was initially being shopped.
The deal marked Kayne Anderson’s largest in the medical office debt space. The portfolio spans 33 states across the US and about 35 percent of the properties are anchored by hospital systems. The portfolio is 92.3 percent leased on a long-term basis according to Kayne Anderson, and has a weighted average remaining lease term of nine years.
The equity side of Kayne Anderson’s real estate business has a longer track record in the medical office space and has previously borrowed from Synovus when financing senior housing and medical office deals, notably.
“While the equity side of our business is one of the largest players in the country in the medical office space, being able to expand our debt platform’s exposure with this flagship deal further establishes our platform in a big way in the medical office lending space, which we think will add to our portfolio not only with this specific transaction but with future business and repeat business with this borrower base,” Smith said.
Kayne Anderson is maintaining appetite to add more exposure to the commercial real estate debt market, including in scenarios like the Synovus deal in which the manager can help provide liquidity to the selling institutions.
“We see a ton of opportunity going forward because of a lack of liquidity in the lending markets and with banks and many others being constrained,” Smith said, noting he thinks the firm will see rapid growth particularly across its lending platform over the next couple of years as markets remain fragmented and liquidity constrained.
“Our view is that all else being equal in terms of risk profile and comfort with the collateral and that investment making sense, generally we view bigger as being better,” Smith said. Scalable opportunities are top of mind for the manager when it comes to commercial real estate debt as well as direct lending and loan purchases tied to single assets, Smith noted.
Appetite for exposure
At present, Kayne Anderson’s commercial real estate debt platform maintains exposure toward multifamily, senior housing, student housing, medical office and self-storage assets.
The firm has invested about $10 billion in its debt strategies since the 2015 inception of its commercial real estate debt platform. Kayne Anderson’s average loan size clocks around $80 million and the manager does not cap its loan size at an upper limit.
The Synovus deal tracks with similar bank loan selling efforts seen at McLean, Virginia-based Capital One and Beverly Hills, California-based Pacific Western Bank prior to its acquisition by Banc of California. In contrast to the PacWest deal, however, Synovus has been deemed by market analysts as a regional bank with an ample size, deposit base and loan book to withstand bouts of volatility akin to what led to the falls of New York-based Signature Bank and San Francisco-based First Republic Bank.