Cory Atkins, Principal, Atkins Companies
In an interview with Invest:, Cory Atkins, principal at Atkins Companies, discussed the ever-changing climate of the healthcare real estate industry, the challenges of new building developments, and shifts in healthcare delivery models that are influencing the demand for medical office spaces. “We are comfortable in the space that we are in and foresee the future being bright,” Atkins added.
What have been Atkins Companies’ significant milestones over the past year, and how does Atkins differentiate itself in the healthcare real estate industry?
We bought a large building in Fair Lawn that has been a great addition to our portfolio. We specialize in medical office buildings in the Northeast and Mid-Atlantic. The market has been slow lately, and having been able to close this deal in an uncertain market was a big accomplishment for us.
Our relationships and hands-on approach have helped set us apart from other companies. We are not the biggest company, we don’t have the lowest cost of capital, and we can’t buy the most properties, but we form strong relationships, and that has served us well over the years. We are a bit old school and believe that how we treat people is of the utmost importance. We believe that if we do right by people, generally, they do right by us. Being honest and transparent and continuing to maintain solid relationships has been our competitive edge.
What are the challenges and opportunities in the healthcare real estate space in New Jersey, and how is Atkins Companies addressing these?
We’ve historically been ground-up developers, but lately, we are acquiring more than we build, despite having the ability to do so. Building has been more challenging recently because land is expensive and approvals are tough to get. The biggest hurdle for acquisition and development has been the extremely high construction costs. Interest rates are also still high. When interest rates were low three or four years ago, the spike put a strain on the market. People who want to sell buildings today are not getting the prices that they could have three or four years ago, which is making those owners reluctant to sell. There has been a tough divide between buyers and sellers, and there’s a big gap in pricing expectations. Properties are not worth what they were four years ago, and that has been a tough pill to swallow. That, coupled with people’s expectations that rates would start coming down, has created a lot of uncertainty. A lot of people don’t want to make the wrong decisions, and that has caused a big stall in deal flow.
Given market conditions, what is Atkins’ approach to identifying and pursuing new investment opportunities?
Saying no to difficult deals and taking the time to find the diamonds in the rough has been our current strategy. A lot of deals don’t pencil out financially, and we think being selective and risk-averse is important. There are still good deals out there; they’re just harder to find. When we do find these good deals, it’s a good time to buy because pricing is a lot lower than it was three or four years ago. Staying patient and disciplined with our long-term goals has been key. The market is cyclical, and things will happen eventually. Staying in our lane, doing deals when they’re right, and passing on them when they’re not is all part of the process.
Have you observed any shifts that are influencing the demand for medical office spaces, or with turning non-medical facilities into healthcare facilities?
We have done a lot of that. Our sweet spot is value-added healthcare facilities. A lot of those are former office or retail buildings. Those spaces, especially offices, are more challenging than people realize. There are certain things the medical sector expects that traditional buildings do not have. It is more time-consuming and costly; however, in the right locations, conversion may be worth it. In some regions, the need for medical spaces is booming, and that is driven primarily by the healthcare systems and groups that are getting an increasing percentage of the market share. We are careful about which buildings we go after. We tend to look for buildings that already have a decent percentage of medical space in them. Our underwriting tells us that the anchor tenants are likely to expand or draw interest from other medical groups that would like to co-exist in a building with them. Again, construction costs are extremely high, so even though it can be costly to convert a traditional office building into a medical building, this can still be the cheaper option.
Have any of the state or local regulation changes affected Aktins’ development strategy?
We are based out of North Jersey and have expanded to six other surrounding states. Nothing has changed, and it goes back to the basics of real estate. There could be two medical buildings right next to each other, where one of them is a great investment and the other is a terrible one. It is more predicated on location and tenancy than state. Some other groups feel differently and only invest in high-growth areas, such as the Southeast or Southwest, but every place needs medical. Understanding the market, density, and growth of the demographics is more important. You have to just take the regulations for what they are and adapt.
Looking forward, what is in store for Atkins Companies and the broader medical real estate industry as a whole? What are your top priorities for the near term?
We are still focused on strengthening our current relationships, building new relationships, finding new acquisitions, and expanding our portfolio. Managing properly and in a way that makes our tenants and investors happy is important to us.
Globally, I’m not sure what’s in store for the industry, and I don’t think anybody actually does. Every day is something new. Tariffs, interest rates, and inflation are all up in the air. All we can do is continue to monitor the current conditions and make the best decisions with the information that we have. Healthcare is going to continue to be a strong sector. We need healthcare; it’s not going anywhere. There is an aging population and a growing population. Healthcare systems are getting bigger and bigger, and there is more private equity moving into the industry, for better or for worse. We are comfortable in the space that we’re in and foresee a bright future.
