Coming from a career in banking, Patrick Marston wanted to establish himself in a niche with a strong credit driver when he transitioned into commercial real estate development 17 years ago.
He found it in health care-related projects, which typically require outsized investments per square foot and considerable tenant improvement dollars for patient care, together with strong tenant credit.
That’s because most medical buildings top out at $300 per square foot to develop, roughly one-third more than an urban Class A office tower. Tenant improvements are often twice the amount as in standard office space, the result of specialized equipment and fixtures that are installed.
But rather than shrink from the increased expenses associated with developing health care projects, Marston and partner Andrew Boggini embrace them as a barrier to entry to competition.
The pair also contend that their holistic approach to design and development, along with a superior bedside manner, sets them apart from other firms.
“We’re kind of blue-jean guys,” says Marston, 48. “We handle everything, we’re forthright, we’re direct. There’s no ‘B’ team here. When you hire us, you get us. If you want someone who will be with you throughout a project, that’s us.”
Today, their Optimal Outcomes LLC has established itself as one of Florida’s premier health care developers, with more than a dozen projects behind them totaling more than 1.5 million square feet from Largo to Fort Myers.
The St. Petersburg-based company also differentiates itself by being lean, maintaining a staff of just 12.
The relatively small size hasn’t stopped the firm from developing relationships with some of the largest names in Gulf Coast health care, though, including Baycare, Bayfront Medical Center, Florida Cancer Specialists, Florida Orthopaedic Institute, St. Anthony’s Health Care and Northside Hospital & Heart Institute.
Clients say Optimal Outcomes’ attention to detail makes the development process smooth, efficient and cost effective.
“They’re really creative in the design process, and their architectural services are second to none,” says Brad Prechtl, Florida Cancer Specialits’ CEO. “They create an environment that is both comfortable and comforting to our patients, right down to color schemes.”
In addition to a Tampa cancer center and a 50,000-square-foot administrative building in Fort Myers, Florida Cancer Specialists is working with Optimal Outcomes on three additional projects, Prechtl says.
For its part, Boggini and Marston say they try to have between two and four new projects in the company’s pipeline; there are currently three new projects in pre-development, including a new 42,000-square-foot medical office that will be part of Lakewood Ranch’s 265-acre Collaborative Opportunities for Research and Exploration park.
There, the firm’s HealthPark at Lakewood Ranch will contain a 10,000-square-foot surgery center and other specialty practices when completed late next year.
“We don’t gauge our success on how big we are, we think that’s rather egotistical,” says Boggini, 48, who joined Marston in 2004. “We consider success to be quality projects and a good reputation.”
Optimal Outcomes’ emergence has dovetailed with one of the largest shifts in the history of health care development, one that has separated care away from hospital-centric facilities to more user-friendly settings.
Hospitals, too, have embraced the trend as a means to control costs and provide care to more patients — even as Florida’s population both grows and the median age of its residents rises.
“Outpatient care is more cost effective, there’s less risk of infection to patients, and patients are less intimidated than if they have to go into a hospital,” Marston says. “People are catching on that these types of developments are good for everyone.
“When we started, everything health care related was connected to a hospital, usually physically connected,” he adds. “Today, almost nothing is. So the impetus on us is to deliver projects that make the provision of health care better, from design to construction.”
And thanks to the influx of retirees and providers’ needs for updated facilities, not even last decade’s economic recession slowed Optimal Outcomes’ progress.
“When the markets in Florida slowed, the demand for medical uses kept going, because they aren’t as tied to the elasticity of the market as some asset classes,” Marston says.
“If anything, it highlighted our experience. Health care development is easier to say than do, and I think we also differentiate ourselves because our tenants know we’re going to keep our buildings in our portfolio for the long term. We build them better than someone who’s aiming to flip a project once it’s completed and leased up.”
Inherent in that long-term hold strategy, however, are challenges.
“Because medical spaces are always customized, they cost more,” Boggini says. “Construction costs are something we constantly have to consider, and there’s much more investment on the part of the tenant than in a regular office space.”
At the same time, this decade’s building boom has produced a shortage of qualified labor and demand for commodities that have pushed up prices throughout the commercial real estate spectrum — dynamics that have been especially felt in health care projects.
Still, Marston and Boggini are buoyed by their prospects for the future, especially as macro health care industry changes appear to work in their favor.
“We’re still very much in growth mode,” says Marston. “We have a wish list of health care systems we’d like to work with going forward, we’re working on those, and with the demographic and other changes taking place, we think there’s opportunity there.”
By: Kevin McQuaid | Commercial Real Estate Editor – Business Observer