RG 074 – Investing in medical office buildings with Mark Mascia
- Mark majored in small business.
- He founded his company 10 years ago
- Mark specializes in medical office buildings.
Nuts and Bolts
Mark’s family have always been involved with medicine; his father is a doctor and his mother worked in medical offices. This meant that he grew up with a good knowledge of the market and always had the right people around to talk to when learning about his markets. When Mark left college after studying small business he became a realtor and worked for a developer for 5 years until he had gained enough knowledge to go out on his own. He started up Mescia Development 10 years ago which is a real estate investment company specializing in medical office buildings, retail, multifamily and small industrial buildings. He currently has $500 million in assets under management across 8 states.
Getting into MOD’s
Mark relates medical office buildings (MOD’s) and their market to where self-storage was 5 years ago. They’re not quite as straight forward to get into as other classes but there is a lot available for investing in. Mark previously worked exclusively in multifamily and retail development however he found construction projects too volatile so when he started Mescia Developments he decided to keep things slow and steady. He started on student housing and multifamily but found it wasn’t a scalable business model. He looked into the retail market and found that a lot of the tenants were medical people who were good tenants and stayed a long time. He used his family knowledge to work out what would make medical offices attractive to investors and get an early start on any medical trends.
Strategy and finding deals
Mark’s strategy isn’t to go for the largest properties as there is too much competition for sources of capital for these. Instead he aims at the level between mom&pop properties and full institutions, for example $10 million and below with an average of 20,000 square ft. Mark’s typical purchase is 75% occupied when first bought and relatively undervalued, he doesn’t aim to immediately renovate and instead adds value over time. Mark often finds deals by approaching old owners who are ready to sell and haven’t put any investment into the property recently, or owners who have inherited the property from a recently deceased relative. Mark advises anyone looking to get into MOD investment to find their competitive advantage, his was having a medical family, and the find out how to use it. He recommends finding deals through brokers or word of mouth and normal off-market research like leaflet mailings.
CAP rates and markets
Due to an increasing ageing population MOB’s are the second most popular investment asset after multifamily and this has compressed CAP rates nationwide to approx 6%-8% average. Mark focuses on the secondary and tertiary markets because the primary ones are too expensive, even during the market crash because most people held onto their MOD assets and didn’t reprice. When Mark is looking for a deal he isn’t as interested in the market as he is in the demographics and long term trends of the area. He looks at relative values for example. Can I get the same space, tenants and income in X place over Y but at a better price so that returns are higher but at the same risk profile. Mark reduces some risk by offering investors to spread their investment over several properties.
- Most important habit – Run each day 3-5 miles and write down list to get it out of his head.
- Most influential person -The family office which helped him get started in real estate.
- Most important tool – The CRM
- Most important mistake – At point of purchase the seller backed out and lost Mark 100,000’s of dollars.