Medical Real Estate Insights from Flagship Healthcare Properties

Outpatient Medical Properties and the Logic of Private REITs

Brannen Edge, President and CEO of Flagship Healthcare Trust, described Flagship’s evolution from one-off investments to a private REIT model. Early transactions were capitalized deal-by-deal with family offices or high-net-worth individuals, but limitations in diversification and scale prompted a move first to pooled investment funds, then to a private REIT in 2018. Edge summarized investor feedback: “Are you crazy?...We want to continue owning it.” This led to a structure that more closely aligned investor interests with the long-term holding period preferred by both tenants and Flagship’s expanding team.

Edge explained, “Private REITs look and feel like an open-ended fund, but they have the benefits...of being structured as a real estate investment trust.” He compared this with public REITs, which, while providing liquidity, can suffer from volatility and market correlation that do not reflect underlying property performance. “Most of our investors have plenty of exposure to the public equity market. And that correlation...as well as the volatility were things that we weren't really interested in,” Edge said.

Targeted Asset Strategy, Portfolio Structure, and Operational Discipline

Edge made Flagship’s asset choices clear: “100% of our investment is focused on outpatient care,” including medical office buildings and ambulatory surgery centers. He emphasized, “We are not invested in [hospitals or senior care]...because the delivery of care...has been shifting for decades from inpatient and on-campus care to an outpatient model.” The outpatient model is seen as offering lower operational and legislative risk while capturing demographic demand.

In portfolio construction, Edge reported Flagship historically allocates “about 60 to 70 percent in the core plus space,” with the balance in value-add and ground-up development. The intent is “to have the stability of the value, the core plus side...but not lag behind returns,” according to Edge. Flagship’s team—now at 130 employees—handles everything from property management and leasing to maintenance and new development. Their vertical integration allows control over cost and service, with third-party owners relying on Flagship’s management expertise for additional millions of square feet.

Flagship’s primary markets are the Southeast and Southern Mid-Atlantic, with 45% of their portfolio in North Carolina and a presence in up to 22 states. This regional focus takes advantage of strong healthcare demand and population trends in high-growth areas.

Managing Market Cycles and Observational Parallels to Self-Storage

The discussion highlighted recession resilience as a common thread between outpatient medical and self-storage sectors. “The healthcare outpatient sector fundamentally has remained extremely resilient,” Edge stated, referencing the sector’s stability through the 2008 financial crisis and the COVID-19 pandemic. Occupancy and rent collections remained stable in times of economic uncertainty, a trend mirrored in the self-storage space for different structural reasons.

Paul Bennett, AAA Storage’s Managing Director, observed that self-storage and medical office both perform well through market cycles. He commented, “The self-storage space...is very resilient and has really outperformed other sectors of the commercial real estate market in economic downturns, much like healthcare real estate has…” The non-optional nature of medical services, and the stickiness of tenants who “make a massive investment into their space,” further supports sector stability.

Conclusion: Track Record, Alignment, and the Value of Expertise

The interview with Brannen Edge brought into focus the value of long-term alignment, vertical integration, and proven experience—qualities familiar to AAA Storage’s own approach in self-storage. AAA Storage concentrates on self-storage and small bay industrial, not healthcare real estate. However, hearing from industry peers reinforces how clarity in sponsor track record, disciplined strategy, and sector-specific knowledge are central to success in any real estate portfolio.