Project Description
Highlights
• 100% occupied medical office condo building | Seven medical office condos individually owned by physicians
• 32% of rentable square feet leased by Advocate Health Care (S&P AA+)
• All brand new five and ten-year leases include annual rent escalations of 2.00% or greater
• At closing, new owner converted asset to a standard multi-tenant medical office building
• Significant value was Added by Lollio and Niedergang by creating a streamlined process that allowed for valuation consultation, new lease structuring, marketing, offer negotiation, and a due diligence process for each condo unit owner simultaneously
Summary
Gino Lollio and Scott Niedergang of Cushman & Wakefield’s Healthcare Capital Markets team have facilitated the sale of the Fletcher Drive Medical Center located 40 miles northwest of Chicago in Elgin, Illinois.
Fletcher Drive Medical Center consisted of seven individually owned medical office condominiums that were owned by the physicians seeing patients out of their suites. Prior to sale, Scott and Gino consulted the condo association on how to maximize the value of their individual units by pursuing a portfolio sale of all the units simultaneously. At closing, the new owner collapsed the condo association and converted the asset to a standard multi-tenant medical office building.
As part of the sale, each physician group that owned their unit agreed to new five and 10-year leases with annual 2.00% rent escalations. Tenants in the facility included Advocate Health Care, Illinois Gastroenterology, Urology, Ltd., Elgin Internal Medical Associates, and Elgin Gastroenterology Endoscopy Center. Elgin Gastroenterology Endoscopy Center is an ambulatory surgery center (ASC) with a certificate of need (CON) in-place. The building was 100% occupied at time of sale.
“By agreeing to pursue a sale together, the condo owners at Fletcher Drive Medical Center were able to realize a pricing premium. The buyer pool for this asset in its entirety is much larger than a one-off medical office condo sale,” says Niedergang. “Our team was able to add significant value by creating a streamlined process that allowed for valuation consultation, new lease structuring, marketing, offer negotiation, and a due diligence process for each condo unit owner simultaneously.”
Lollio adds, “Opportunities to acquire 100% occupied medical office buildings with a strong mix of synergistic tenants are few and far between in the Chicagoland market. The inclusion of an ambulatory surgery center combined with the strategic location between Advocate Sherman Hospital and Presence Saint Joseph Hospital made this a unique investment that saw significant interest from the market.”
