Dialysis Centers Offer Investors an Option the Internet Can't Easily Disrupt

In the hunt for real estate leased to tenants the internet can't easily disrupt, dialysis clinics have increasingly become an investment option.

These clinics serve a big market. An estimated 37 million people have chronic kidney disease, according to the Centers for Disease Control and Prevention.

Treatment can mean regular outpatient visits to a dialysis center, many of which occupy real estate owned by individual investors who have net leases with the tenant.

With net leases, the tenant covers most of the property’s operating expenses. The owners get a rent check that produces an annual return on investment, known as a capitalization, or cap, rate.

DaVita and Fresenius Medical Care are two leaders in outpatient dialysis. DaVita has more than 2,660 centers around the United States, compared to more than 2,400 Fresenius Centers. Capitalization rates average about 5% to 6% for properties either of these fill, a projected rate of return that can appeal to investors.

Here’s a sample of dialysis centers available to investors:

2429 Hickory Tree Road, Balch Springs, Texas: $3.27 million, 5.5% cap rate

This property was built in in 2018 from the ground up and has a 15-year lease. Balch Springs is a suburban city north of Dallas.

A Dollar General is across the street from the location, and a Walmart Supercenter is a half mile away.

413 E. Broadway St., Toledo, Ohio: $1.6 million, 6% cap rate

This building had previously been a Family Dollar store. DaVita redeveloped the site recently and has a new 15-year lease on the building that includes regular rent bumps.

100 Washington Blvd, Montebello, California: $5.5 million, 5.75% cap rate

Built in 2014, the building replaced an motel in the city, which is next to East Los Angeles. The property sits on a corner with the Santa Ana Freeway in one direction and with the San Gabriel River Freeway in the other.

The property has 10 years left on the lease that has two additional five-year options and 10% rent increases every five years.

783 New Highway 68, Sweetwater, Tennessee: $2.9 million, 5.75% cap rate

Sweetwater is a small town about midway between Knoxville and Chattanooga off Interstate 75. Built in 2009, Fresenius has a new 15-lease on the property, which is next to a grocery-anchored shopping center.

Fresenius had bought the property last October for $2.15 million and then sold it to Atlanta-based investment bank SunTrust Robinson Humphrey a couple of months later for $2.62 million.