The Fridley Medical Center is a 60,476-square-foot, multi-tenant medical office building located on the campus of Allina Health’s Unity Hospital in Fridley, Minnesota. The building is anchored by Multicare Associates, a provider owned and operated clinic offering family medicine, internal medicine, pediatrics, OBGYN, occupational health, orthopedics, surgery, and nutritional services at this location. Other tenants in the facility include Fridley Medical Pharmacy, Virginia Piper Cancer Institute, US Oncology, and NovaCare Rehabilitation. Our team was hired to sell the asset on behalf of a partnership that was comprised of physicians associated with Multicare Associates, a local real estate developer, and the developer’s capital partner.
At the time of sale, the facility was 100 percent occupied with all leases being triple-net in nature. Each lease accounted for rent escalations and a management fee being reimbursed by the tenants. The Landlord’s sole expense responsibility was for the repairs related to the roof and structural components of the building.
This assignment was complex in nature due to bond financing that needed to be assumed. In order to build this project in 2010, the developer was forced to use a series of bond financing with interest rates ranging between 5.625 and 6.875 percent. At the time of sale, the market rate for a new loan was between 4.50 and 5.00 percent. Furthermore, this above-market bond debt balance equated to roughly 50 percent of the list price. This required the buyer to come up with a large portion of the purchase price in equity. While these obstacles significantly decreased the buyer pool, our team was still able to source a publically traded Real Estate Investment Trust (REIT) willing to assume the debt at a purchase price exceeding the Seller’s expectations.
In order to make the bond assumption process go as smoothly as possible, the Buyer was referred to and hired the attorney that drafted the bond documents. While the assumption of debt can typically take more than six months on average, this attorney’s involvement allowed the transaction to close within 60 days from an executed purchase and sale agreement.
Seller Profile: General Partnership between Developer, Equity Investor and Practicing Physicians – Minneapolis, MN
Buyer Profile: Publicly Traded Healthcare Real Estate Investment Trust (REIT) – Nashville, TN