Find Demand, and Let it Run You Over

Peter Westmeyer, founder of MBRE Healthcare, turned the demand for medical office space into the largest private healthcare real estate portfolio in the United States

Peter Westmeyer calls it “an unfortunate hiccup,” but looking back, a failed business deal actually launched him on the path to his current position as founder, president, and managing principal of MBRE Healthcare. The organization is a full-service real estate company that currently owns, manages, and leases over twelve million square feet of healthcare properties in more than thirty states across the country, valued at more than $4 billion.

Born in Toledo, Ohio, Westmeyer attended the University of Vermont and then earned master’s degrees in finance and real estate from the University of Denver. After two years as an investment banker with Bank of America, he moved to MB Real Estate, one of the most respected and well-capitalized real estate firms in the United States. “Real estate intrigued me,” he says. “I liked both the transaction piece and the ongoing relationships you have with people.”

While working with one investor, he grew interested in the healthcare sector. “The ‘silver tsunami’ demographic was intriguing to a real estate investor,” he says. “It had a long runway, a lot of tailwind, and favorable fundamentals. It seemed like a good investment over the long haul.” His client purchased three properties with Westmeyer’s help, but a fourth deal unexpectedly fell apart. “As their advisor, I said, ‘If you don’t want it, I’ll take a shot,” Westmeyer says. “It was an unfortunate hiccup, but it enabled us to expedite our move into private equity.”

Westmeyer closed his first deal, a two-building medical office portfolio in Aurora, Illinois, in early 2010. And then he started buying more. What started as a one-person operation has turned into a company that is the largest private owner of healthcare real estate in the United States. An operating division of the Chicago-based MB Real Estate, MBRE Healthcare offers a wide range of services including acquisitions and project financing, development and project management, leasing and property management, and consulting, with about one hundred people staffing its multiple service lines from offices in Chicago, Atlanta, Denver, Dallas, New York, Orlando, Florida, and Columbus, Ohio. “To quote a business partner, ‘You find demand, and then let it run you over,’” Westmeyer says.

Westmeyer’s responsibilities include sourcing, analyzing, and financing investments, as well as structuring and raising capital for the firm. He raises and manages private equity funds for MBRE Healthcare’s acquisition and development efforts and oversees business development and the ongoing performance of MBRE Healthcare’s national portfolio.

Among the team’s biggest recent projects was the acquisition of an Illinois Bone and Joint Institute portfolio, a $130 million deal involving nine locations in and around Chicago. In late 2015, the team acquired a nearly $700 million, seventy-building portfolio of mainly Texas and southeastern US properties. “It’s hard to take on seventy properties in a short period of time, but we have the team and infrastructure in place to parachute in, assess the market and competitive healthcare landscape, and execute,” he says.

The organization has doubled or tripled in size every year from 2010 through 2016, in both square footage and dollars—but all of this growth hasn’t been easy. While building out that portfolio, Westmeyer lives in Chicago with his wife, Sofia, and their three young children. “That big seventy-building deal was happening just after our third child was born. There were a lot of late-night phone calls during late-night baby-rocking sessions,” he says with a laugh. But Westmeyer has no plans to slow down. His goals are to continue expanding relationships with leading healthcare systems and portfolios across the country. “We want to make informed investment decisions, and any opportunity that can help a health system in their growth strategy and simultaneously offer an attractive, risk-adjusted return to our investors is something that we are interested in,” he says. “We will grow our portfolio to align with the best health systems we can.”

There are risks, of course, especially from the headwinds of change blowing from Washington. As healthcare policy debates continue, the tenants of his buildings face enormous pressures in not knowing how they will be reimbursed for their services. That does change the way he approaches new deals, Westmeyer says. “We do a comprehensive credit review of all the health systems we align with to try to understand the pressures that our tenants face and their ability to succeed,” he says. “We want to align with profitable systems that can stomach these changes that are coming, that are positioned to handle cuts in reimbursement and still be successful.”

No matter how the coverage debate plays out, though, Westmeyer believes that he is still in a healthy business sector. “We don’t know the specifics of what doctors will be paid, but whatever it is, healthcare will still be around, and it will largely be done in a real estate setting,” he says. In fact, he believes that coming changes will help him. “Frankly, that is part of our strategy,” he admits. Pressures to lower healthcare costs will continue to bolster demand for outpatient facilities, to push procedures from high-cost hospitals to lower-cost settings. “These are market forces as well as regulatory forces,” he says. “We are trying to house that lower-cost setting. It’s not like retail, where you can go online to buy things. With healthcare, you still have to see a doctor and have procedures done in person for the most part.”

“On behalf of Capital One Healthcare, I’d like to congratulate Peter
Westmeyer on his success. As a long-time lender to Peter and MB Real
Estate, we remain impressed with their ability to source strong medical office transactions and execute on their business plans.” –Erik Tellefson, managing director, Capital One

 As part of a top ten US bank, Capital One Healthcare is well positioned to meet your medical property financing needs. Our dedicated team develops solutions that align with your business plan—whether that’s growing capital, funding capital purchases, financing replacements or acquisitions, funding tenant improvements, or leasing commissions, and more.