Real estate investment trust Healthcare Realty Trust and global investor KKR said they formed a joint venture to invest in and own medical outpatient buildings as healthcare systems consider how best to use property that typically accounts for a significant amount of their annual expenses.

Under the agreement, Healthcare Realty, a Nashville, Tennessee-based real estate investment trust, plans to put 12 of its properties, valued at nearly $383 million, into the joint venture's portfolio with KKR making an equity contribution equal to 80% of the value of the properties. Healthcare Realty will retain a 20% interest in the portfolio.

Healthcare Realty also said it expects to receive about $300 million in proceeds for the contribution of the "seed portfolio" to the venture and plans to explore more acquisitions with KKR. These opportunities could include future contributions from Healthcare Realty's portfolio to the venture, according to the REIT.

Healthcare Realty and KKR are partnering as healthcare providers grapple with challenges including increased costs and a lack of personnel. Median hospital margins have been negative for over a year, with real estate costs typically accounting for a “significant chunk,” or between 8% and 12%, of a health system’s total spending, according to a JLL healthcare and medical office report.

Healthcare providers looking for ways to conserve cash might consider redeploying capital by monetizing their real estate through strategies including sale-leasebacks and outright sales “to an experienced medical property investor,” the JLL report said.

KKR has committed up to $600 million to the joint venture for additional acquisitions or contributions of stabilized assets, Healthcare Realty said. KKR's additional capital commitment would increase the potential value of the venture to more than $1 billion, the REIT said.

“We look forward to collaborating with KKR to strategically invest in the medical outpatient sector," Healthcare Realty President and CEO Todd Meredith said in a statement. "In the near term, our capital allocation priority is to repurchase stock on a leverage neutral basis."

Peter Sundheim, a KKR managing director, said in a statement the company looks forward to future investments “at an opportune moment" as some companies sell properties to pay down debt. The resulting "deleveraging cycle" is "impacting all types of real estate, including in favored sectors with excellent long-term fundamentals and demand drivers," he said.

Healthcare Realty did not disclose the dozen properties it is contributing to the new venture's portfolio. A KKR spokesperson said the firm hopes to release more information when the deals for transferring the properties to the joint venture close.

Even so, Healthcare Realty did say the buildings are medical outpatient buildings located in seven major markets and, for the most part, are located at or adjacent to leading hospital campuses. The properties contain a total of 762,399 square feet of space and are 98% occupied. They will become part of the venture in May and June as customary closing conditions are met, the statement reads.

Healthcare Realty will manage day-to-day operations and leasing at the sites, it said.

Healthcare Realty Trust's real estate portfolio contains 3.6 million square feet of space in Dallas and an additional 2.4 million square feet in Houston. Denver, Los Angeles and Charlotte, North Carolina are among the REIT's largest markets based on the amount of square footage owned.

Eastdil Secured and BlackBirch Capital served as financial advisers for Healthcare Realty. Latham & Watkins served as the Healthcare Realty's legal adviser. Newmark’s healthcare capital markets group was KKR's financial adviser, and Simpson Thacher & Bartlett served as its legal adviser.