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Three Healthcare Real Estate Professionals Launch Capital Healthcare Properties And Form Partnership With HSG Medical To Develop And Acquire Medical Office Buildings

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Three experienced commercial real estate professionals serving a niche in the national medical office building (MOB) sector have formed Capital Healthcare Properties to address the needs of leading healthcare systems, physician groups and specialty providers.

Daniel Ahlering, Jack Sullivan and Jay Heald, the firm’s founding principals, have also formed a programmatic joint venture partnership with HSG Medical, an affiliate of Hubbard Street Group, to facilitate and launch new development and acquisition initiatives.

Ahlering, Sullivan and Heald will draw on their recent experience with a Chicago-based MOB developer where they completed more than one million square feet in new developments and leasing assignments and earlier within the capital markets and tenant representation groups at JLL. Capital Healthcare Properties provides a comprehensive menu of services ranging from ground-up development to acquisitions to leasing of owned and third-party assets. On the development front, the joint venture will target medical office buildings ranging from 20,000 to 100,000 square feet.

“Our primary goal in forming Capital Healthcare Properties is to leverage our collective experiences, resources and relationships to lessen a client’s real estate burden. This allows them to focus on providing tremendous patient care, their core business,” said Jay Heald, Managing Partner, Capital Healthcare Properties.

In partnering with HSG Medical, Capital Healthcare Properties will draw on the experiences and expertise of the two HSG Medical Principals, John McLinden and Kage Brown. Combined, the Principals of HSG Medical have over 45 years of national real estate development experience and have developed over 12.5 million square feet and 5,000+ residential units, exceeding $3 billion in aggregate capitalization for these projects.

“Strategically we believe the health care industry represents a huge growth opportunity for commercial real estate,” said Kage Brown, Principal, HSG Medical. “In the aftermath of the pandemic, medical offices remain one of the most resilient and recession-resistant commercial real estate sectors, with low correlation to greater economic and geopolitical trends.”

HSG Medical will provide capital, investment oversight, accounting and administrative services along with office space for the joint venture. The partnership will operate independently from Hubbard Street Group.

The principals’ resume of involvement in new development projects includes work with Northwestern Medicine, Advocate Health, Northwest Community Hospital, HonorHealth and The CORE Institute, among others, in Illinois and Arizona. The development projects, with varying degrees of complexity, range in size from 20,000 to 180,000 square feet. Further, several projects were awarded national and regional awards for development excellence. Specific project highlights include:

• Oak Brook Commons, a 180,000-square-foot ground-up development for Northwestern Medicine that was completed in the fourth quarter of 2022 and is located in Oak Brook, Ill.

• NCH Buffalo Grove Outpatient Care Center, a 71,000-square-foot ground-up development for Northwest Community Hospital that was completed in the third quarter of 2021 and is located in Buffalo Grove, Ill. The project has been recognized for excellence by a variety of healthcare and real estate organizations.

• Mercy Medical Commons II, a 60,000-square-foot ground-up development anchored by The CORE Institute that was completed in mid-2020 and is located in Gilbert, Ariz. The project has been recognized for excellence by a local real estate media outlet.

“Delivering successful outcomes is all about relationships, tactical execution and regular communication during all phases of a client project,” said Dan Ahlering, Managing Partner, Capital Healthcare Properties. “Our collective experiences and contacts in the industry, and our partnership with HSG Medical, give us the tools and insights to uniquely serve our clients and redefine the client-service provider relationship.”

The Healthcare Environment

Despite many issues facing the healthcare sector—labor shortage/costs, supply chain issues, inflation and reimbursement pressure, etc.—there remains a tremendous need and appetite for outpatient medical office investment and development. This is due to a variety of market forces that include a shift in patient care preferences away from hospitals to outpatient and ambulatory surgical centers.

The shift already was occurring with policy/regulation changes, purchaser preferences, innovation and a lower provider operating cost, and then was exacerbated during and post-pandemic.

Outpatient facility revenue is estimated to be approximately 50% of hospital revenue and those facilities provide a lower cost basis versus inpatient or HOPD sites. According to Kaufman Hall and JLL, outpatient revenue grew by 8% in 2022. Further, the JLL report says outpatient demand for ages 55+ alone is forecast to grow 16.9% by 2025.

“Hospitals, healthcare systems and physician groups recognize the need to invest in their outpatient strategy, especially as the healthcare environment, business climate and patient preferences constantly evolve,” said Jack Sullivan, Managing Partner, Capital Healthcare Properties. “We’ll make those investments more sound because of the depth of resources we bring to each assignment.”

 

Source: HREI

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5 Of The 20 Largest Medical Office Deliveries Expected This Year Are In One City

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A new report indicates Houston’s medical office market absorbed almost 40K SF in Q1, and more growth is coming, with the city poised to be home to five of the 20 largest medical office projects set to deliver this year across the nation.

Overall medical office leasing increased 26.4% year-over-year, according to JLL’s Medical Office Building Insight report that was just released. Additions to the market include the Hope Health Clinic’s 70K SF flagship location in Sugar Land and Orion Medical Group’s 47K SF building in Clear Lake.

Another 606K SF is under construction, according to the JLL report. Q2 is set to bring the delivery of the largest medical office building project in the country this year, per 42Floors.

A 400K SF, $1.3B project is the O’Quinn Medical Tower at the McNair Campus of Baylor St. Luke’s Medical Center, Houston Innovation Map reported. The 12-story building will include an ambulatory surgical center with 12 operating rooms and 10 endoscopy suites, an 80-bay setup for infusion therapy, more than 70 exam rooms and more than 850 parking spaces, the article states.

Four other Houston projects made 42Floor’s national top 20 list. Two of them are Kelsey-Seybold projects slated to deliver in Q3: a 158K SF center on the North Grand Parkway and a 116K SF ambulatory surgical center in Clear Lake. The other two projects listed are the 159K SF Houston Methodist Sugar Land Hospital Medical Office Building 4 and the 107K SF 1715 Project in Friendswood.

Houston offers the highest concentration of medical office building projects of any metro on the 42Floors list. That designation comes as healthcare systems like Houston Methodist and Memorial Hermann continue to expand their operations to match population increases, leading to sustained growth in the medical office market, JLL’s report states.

Other trends seen in Q1 include the popularity of Class-A medical office space, reflecting the flight to quality seen across the entire office sector. The absorption for Class-A medical office totaled about 50K SF while Class-B’s was -10K SF, balancing out to the nearly 40K SF total absorption.

Sugar Land and Clear Lake continue to show themselves as strong suburban markets for the medical office building market development, totaling over 2M SF and 1.75M SF of inventory, respectively.

The Woodlands, which is looking to become a hub for the life sciences industry, has 2.52M SF of medical office building inventory, according to the JLL report.

“Houston’s medical industry is propping up its potential to draw life sciences business,” Matt Gardner, leader of CBRE’s Americas life sciences advisory group, told Bisnow. “For decades, the pieces have been there. I think the sense around the world in the industry is that it’s starting to come together now. And it’s starting to show up for more of the growth that we’ve been hoping for for a long time.”

 

Source: Bisnow

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Medical Office Building Mergers, Acquisitions Up 14% In First Quarter 2023

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Medical office building mergers and acquisitions were up 13.7 percent in the first quarter of 2023 and up 5 percent from the same period last year.

Medical office building spending increased by 21.3 percent over the last quarter, hitting $991 million in the first quarter, according to an April 14 press release.

The largest medical office building sale with a disclosed price in the first quarter was for $190 million.

Tennessee saw the highest number of mergers and acquisitions in quarter one with 11 deals, followed by California, Illinois, Florida and Texas.

Montecito Medical was the busiest acquirer in the market, obtaining 261,307 square feet of property across the country. The real estate investment firm’s most expensive transaction of the quarter reached $48 million.

 

Source: Becker’s ASC Review