Andrew Dick: Hello, and welcome to the Healthcare Real Estate Advisor podcast. I’m Andrew Dick, an attorney with Hall Render, the largest healthcare focused law firm in the country. Today we’ll be speaking with Matt Coursen, the Mid-Atlantic Healthcare lead at Jones Lang LaSalle, JLL. JLL is a Fortune 200 commercial real estate advisory firm with a robust healthcare real estate practice group with over 2800 professionals across the country. We’re going to be talking about Matt’s background in the industry and the group that he leads within JLL. Matt, thanks for joining me today.

Matthew Coursen: Thanks, Andrew. Happy to be here.

Andrew Dick: Matt, before we talk about your role at JLL, let’s talk about your background. Tell us where you’re from, where you went to college, and what you aspired to be.

Matthew Coursen: Sure. I was born and raised here in the suburbs, just outside Washington, DC, actually about less than a mile from where I sit right now. Early in my life, I think I had an indication I would be in sales in some form. But after graduating from Washington and Lee University in Lexington, Virginia with a degree in journalism, I went to work for USA Football, which is a JV between the NFL and the NFL Players Association. I thought I wanted to be in the sports industry and work in that sports marketing world and use my communications degree. But after a couple years, I realized I wasn’t using all of my skill sets to my advantage. So I had some friends in real estate and they suggested I take a look at that industry, and I did win an interview with a small real estate firm called Swallowing and Fly, and very shortly thereafter we were acquired by JLL, and I’ve been there ever since. That was about 17 or 18 years ago.

Andrew Dick: So Matt, how did you end up in the healthcare real estate business. When you joined that smaller firm, were you thrown into healthcare real estate assignments, or did your work evolve?

Matthew Coursen: No, it evolved over time. Most commercial real estate brokers get into the business as generalists. You’re really trying to close any deal you can, and so you’re learning quickly about different industries. It wasn’t until about six years into the business when I started working in the healthcare side, I started out doing technology companies and some government contractors and cybersecurity was hot back then. So really became a generalist. And in 2011, I led the team that pursued and ultimately won the Children’s National Hospital business. And we were hired to help them with strategy and lease administration and transaction management and project management, and really a whole host of real estate services because they didn’t really have a real estate department.

So for a number of years I was their defacto real estate director, which was a trial by fire. I got my 10,000 hours in healthcare real estate over that five or six year period, helping them with over 70 transactions and helping them deal with property management issues and things that just popped up as being their go-to person in real estate. So that really gave me the background, the subject matter expertise in healthcare real estate that I needed, and that’s what propelled me into the business I have today.

Andrew Dick: Got it. And Children’s National, talk a little bit about that organization and their footprint just briefly.

Matthew Coursen: Yeah, they’re the 25th largest employer in the region. In their campus, they’ve got their main hospital campus, downtown DC. Then they’ve got a research and innovation campus further up into DC at the Old Walter Reed Army Medical Center. They’ve got about in total there about three million square feet, and then they have about a million square feet of ambulatory real estate out in the community. Pediatric offices, specialty offices, primary care, and those are about 70 or 75 of those locations. So they’ve got a fairly large footprint for a small nonprofit hospital.

Andrew Dick: Got it. So talk about your role today at JLL, because I know you used to be the boots on the ground, now you’re leading a team. Talk about that. What does the team look like and talk about your role.

Matthew Coursen: Yeah. Back in 2017, after working with Children’s for a number of years, I realized that this industry is massive. We consider the healthcare real estate industry to be a trillion dollar market. And so I realized that we had really strong market share locally with working with hospitals and health systems, but there was a lot of unplowed ground when it comes to other healthcare organizations we could be working with. So I went to the leadership regionally and put together a business plan to really put some emphasis behind the healthcare business that we have here, put some leadership behind it, some resources, recruit some folks to join the team and really expand the business.

So in the last four or five years, we’ve more than doubled the business, and we’re working with more hospitals and health systems and private equity and venture backed healthcare groups like US Radiology, US Dermatology, Carbon Health, and it’s been a great expansion of our business over the last five years or so.

So I lead that team and I’m responsible for growing that revenue across all of our businesses, not just brokerage, but also property management and project management and capital markets work that we do. So that’s my leadership role, but I still do run multiple national accounts for the firm of clients that I’ve sourced over the years. And so that’s what we do, and we’re trying to grow it all over the country. We’ve got a healthcare practice that’s national, but it’s not in every single market. So we’re trying to expand and make sure we’re covering as many markets as we can.

Usually if you go into any town or a city, one of the largest employers is the hospitals. So it’s 20% of our economy and it’s growing every year, and it’s only going to get bigger. So at JLL, we’re very bullish on industry specialization in general, but especially with healthcare and life sciences, we’re very, very bullish on the growth of those businesses.

Andrew Dick: Got it. So talk about some of the venture capital or private equity backed healthcare providers that you’re working with. Because I know Matt, we’ve talked about that before, the growing area of interest for private equity and venture capitals healthcare, that takes a lot of different shapes and sizes. Talk about what you’re seeing and the type of work you’re doing in that niche area.

Matthew Coursen: Yeah, it’s a great topic because it is growing like crazy. There’s a big, almost a gold rush to try to harness the opportunity that’s in front of us to take technology and a lot of money that’s out there in the economy right now that’s waiting for deployment and trying to put some horsepower behind healthcare because a lot of people believe healthcare is fundamentally broken. It’s more sick care than well care. And there are a lot of organizations out there trying to do a couple things.

One, they’re trying to use technology to solve a lot of the challenges we have in healthcare business. And the other is they’re trying to reach the consumer in a more direct way. They’re either trying to solve the value-based care challenges that are out there, or they’re trying to win the consumer facing healthcare game that’s out there.

So we work with a lot of private equity groups. So not just the firms themselves, which we do a lot, we’ll help advise them on any acquisition they’re looking to make, any investments they’re looking to make, and we evaluate the real estate footprint of that healthcare company for them. But we’ll also help post acquisition and we’ll go actually work with the individual company like a US Dermatology for instance, and help them build a real estate strategy using data analytics.

So we at JLL have also responded to our industry and said, “We need to level up for our clients, and the best way to do that is to get data.” Is to go get big data, harness that, it’s expensive, and then put it into a software that’s really user friendly and that can enable a really thoughtful data driven real estate strategy.

So what we found is that our private equity backed, venture backed healthcare clients are really compelled by that software, by that analytics that we’ve built, because number one, it helps with business case formation. So whether they’re looking to acquire another business or roll up another healthcare business, a lot of the maps and the images and the visualizations we create can be used for building that business case for creating decks and leadership presentations and things.

But also, we’re able to use the platform to help the actual business scale and grow and improve their EBITDA margins, which is what those private equity groups care about. And so it’s a really powerful predictive model, and we’ve been building it for the last 10 years or so.

The key is the data that you put into it. At its core, it’s just the RGIS platform, the Microsoft platform, it’s something that we’ve taken and we’ve really added a lot of horsepower to through data and the data’s expensive. We’re talking about claims data, we’re talking about procedure codes, and ID nine and ID 10 codes that we can layer in. We have a latitude and longitude for every healthcare provider in the country. We’ve got payer mixed data, we’ve got all the demographics and psychographic data. We’ve got of course, real estate data. So we know where all the real estate options are, and we put it together in something that’s really, really powerful.

And the two main things we do with our clients, not the private equity firms themselves, but the actual healthcare providers, is we’re helping them, one, really diagnose the portfolio they have and make sure that we are optimized there and that there’s no waste in the healthcare real estate part of the business.

And then we’re also helping them future, forward looking and thinking about growth, because growth is the name of the game, and they either want to enter new markets or they want to potentially acquire another group in another market to enter the market that way. And so we use our analytics platform to do that for them, and it’s a great partnership. And ultimately, when it comes time to do the real estate deal, we’ve done all this great strategy work and all this analytics work, and it really makes the site selection process very, very straightforward, very simple, and at least the better outcomes for them and their patients. So we’re excited about it and it’s something that I think that sets us apart.

Andrew Dick: Got it. So talk about some of the concerns that providers are raising when they’re looking at selling their real estate. Things like continuity of ownership, some other trends you and I have talked about before. Let’s dive into that a little bit because it seems like there is quite a bit of interest in sale lease backs over the past few years. What’s your take on those type of opportunities?

Matthew Coursen: That’s probably not a whole lot unlike what you’re seeing with your clients. Whether they want to sell or buy or lease or refinance their real estate, our advice is pretty straightforward. We want to first build a strategy, figure out with them what exactly it is they’re trying to achieve. Different organizations have different goals. We’ve seen hospitals buy back real estate that they had previously leased or done a ground lease with the developer on. So we’re seeing a little bit of everything these days when it comes to buying and selling and leasing.

We were just talking to a big healthcare about advising them on selling a large portfolio they have in this region, and they ended up deciding to put that project on hold despite they’ve got a pending loan maturity here coming up and they still aren’t ready to sell because the capital markets are in a major upheaval at the moment, and things are pretty frothy. So they’re not going to end up pulling the trigger on that sale yet.

So everyone’s got different challenges, but the first thing we want to do is help them think about the strategy and then build that plan for the tactical moves that help them think about control, compliance and succession planning. Those are the three big issues at the table most of the time.

What we see is that the control of the real estate is something that either the organization doesn’t care about at all, they’re fine being a tenant, they don’t have to own the real estate, and other organizations really care about ownership. They don’t want to be a tenant, they want to control it. They want to get the value of the appreciation of the land or the building or both. And so that’s a big thing. We just have to align with what their goals are.

Another thing they care about is compliance. You got a lot of healthcare provider owned real estate. So a private equity back group will come in and buy a practice. Well, oftentimes the doctors will own their real estate and whether it’s a condo or it’s a standalone building, and so the PE firm has a choice. They can either buy the business and the real estate or they can just buy the business. Oftentimes what we see, they’re just buying the business. So the real estate then is still in the hands of the provider, but they no longer own their business. And so now you have a potential start compliance issue here. You got to make sure that your clients have arm’s length transactions, their fair market values are in line. And so that’s something that’s a big concern. So we’re careful to advise them there.

And I think those are the biggest ones, the biggest issues that are at the table. But succession planning goes into that as well. Sometimes you’ll have providers that want to retire. They want to monetize the real estate to fund their retirement, but the private equity backing or the organization that’s invested in that business doesn’t want to buy the real estate. So then we can come in and try to help them in that way, which is another party there. So there’s a lot of nuance to it, but that’s what we’re seeing out there right now.

Andrew Dick: Great. Thanks for the insights, Matt. So let’s move to the state of the industry in general. Give us an idea of where you see the healthcare industry at large going in the healthcare real estate industry. How will that be impacted in the future?

Matthew Coursen: I think the consolidation of hospitals and health systems will continue. I don’t think that’s a novel idea, but I think that’s going to continue. More than half of the hospitals out there reported negative margins over the last couple of quarters. So I think we’re going to see a lot of consolidation, and that’s going to lead to a lot of real estate opportunities in the healthcare of real estate space because there’s just so much opportunity there and a lot of facilities that are going to need to be repurposed or sold or bought or leased or what have you. So a lot of opportunity there because of consolidation.

I think number two, we’re going to continue seeing PE and VC investment in these digital health companies. They’re only getting bigger and trying to solve bigger challenges. And so I think that’s going to continue. And it may not have a big impact on the real estate side, but it just depends on how much virtual care, telehealth, reimbursement rates change. But I think brick and mortar healthcare is here to stay for sure, but I think the VC and the PE investments is going to keep churning and that’ll create some opportunities.

And then the third is big corporations are going to attempt to solve the value-based care challenge as it relates to a direct to consumer model. So think about Amazon potentially acquiring One Medical, which is a primary care platform. Or think about Walmart partnering with UHG. Whether it’s through M and A or genovo growth, I think there’s going to be a lot of real estate opportunities as a result of those types of partnerships and mergers. So that’s going to be exciting from a healthcare real estate perspective.

Andrew Dick: Yeah, I think you’re exactly right, Matt. I was looking at some of the trends this morning and Walmart recently announced they’re going to open 16 more clinics in Florida, some of the major metro areas like Tampa and Jacksonville. And these big companies are all trying different models, trying to drive down cost. I think we’re going to see more competition from some of the nontraditional providers, which is really interesting.

Matthew Coursen: I totally agree.

Andrew Dick: So where do you see the opportunities right now? We talked about digital health, venture capital, private equity, and what they’re doing. Where do you see the big opportunities in terms of healthcare real estate right now and in a pretty unique market, I would say?

Matthew Coursen: Look, the return to office movement is still really early days. Cap rates for office buildings are not where they need to be. So that is not an asset class people are excited about at the moment, but MOBs are still attractive. Cap rates aren’t where they were a year ago of course, but the MOBs are a much safer bet right now when it comes to sales and recapitalization. So I think that’s going to continue being something to look at.

So I like the MOB side of things right now. Hopefully the capital markets will open back up next year and it’ll get even better. But it’s certainly a safer place to be right now than office.

On the leasing side, I think the retail push, the consumer facing push for medical is going to continue. And so hopefully the healthcare world will continue to buoy the retail world. It’s not going to absorb all of it. Not every big box store is going to turn into a hospital, but I do think we’re going to see a lot of that happen, especially in some of those secondary tertiary markets where you don’t have a lot of great strong national anchor tenants everywhere.

And then the third is really the project management side of things. The building out of healthcare facilities is so expensive and it’s so specialized that I think that’s going to continue growing. It’s a big part of our business at JLL. Our project management side in healthcare is really, really strong. We’ve got great specialists in that area, and it seems we can’t hire these people fast enough.

I just saw a budget a few minutes ago come in through from a hospital client of mine that you wouldn’t believe, Andrew. $580 a square foot to build out a primary care clinic. And now that includes furniture and fixtures and equipment and things, but that’s an all in number, but that’s a very, very big number. And a few years ago, you could have built a whole building for $500 a foot.

So I think with costs on the rise, it’s going to be important that these healthcare groups work with firms that can help them manage these projects, manage these costs, take advantage of economies of scale, and buying power that firms like JLL have. So I think that’s another trend we’re going to keep seeing.

Andrew Dick: Interesting. That cost per square foot, that’s a huge number.

Matthew Coursen: Huge number.

Andrew Dick: Really interesting. I’m hoping at some point we’ll see construction costs go down, but it just seems like they keep going up or those costs keep going up.

So at the end of each interview, Matt, I typically ask my guest what advice you would give to a young professional who wants to enter the healthcare real estate business. What would you say?

Matthew Coursen: I would say now is a great time to get into the business because it is the bottom of the market. It’s a trough. It’s a challenging time. And if you’re young and hungry and you’re able to get in there and really roll up your sleeves and learn, this could be an excellent start to a career in commercial real estate. But I think it’s a lifestyle choice to do what we do. You have to really make sure that it’s something you personally want to do with your lifestyle, that it suits that level of effort and that level of commitment.

So I really advise people a lot, younger people, find something that’s personally rewarding to you about your skill sets, something that you feel good about excelling in, and then find some interest. Whether it’s real estate or it’s healthcare or it’s anything else, try to marry those two things up. I think a lot of people use the word passion a lot, but I don’t think passion’s something that’s there day one. I think passion is there after you’ve had some success, you’ve had some failures, you’ve had some learnings over time. So I think it’s really just focus on where you’ve got a skill set and interest and try to pair those. Real estate could be one of those things, but it’s foundational to understand self-awareness and understand who you are and what makes you happy, and then what you’re interested in first.

Andrew Dick: That’s great advice, Matt. I heard Mark Cuban recently, someone asked him a question about where should you focus your efforts as a young professional? And he said something very similar to what you said. Not follow your passion necessarily, but follow your effort is what he often says, which goes to your interest and what you’re willing to put your time and energy into. So I think that’s great advice. Matt, tell us where the audience can learn more about you and JLL.

Matthew Coursen: Yeah, we have a pretty healthy presence on LinkedIn and also on JLL.com. We have an industry section where we can dive into the healthcare side of our business and find people, professionals you can contact, learn about our services and some of our clients and case studies are on there. So I would drive people to JLL.com and my LinkedIn page.

Andrew Dick: Got it. This was great, Matt. Thank you for doing this.

Matthew Coursen: Andrew, thank you for having me. love doing it. And let me know if I can help you with in the future.

Andrew Dick: You bet. Well, thanks to our audience for listening to the podcast on your Apple or Android device. Please subscribe to the podcast and leave us feedback. We also publish a weekly update on healthcare real estate matters. To be added to that list, please go to my LinkedIn page and you can subscribe to that. Thank you.