Gino Lollio and Scott Niedergang of Cushman & Wakefield’s Healthcare Capital Markets team have facilitated the sale of the Katy Medical Arts Center in Katy. The 61,082-square-foot medical office building is fully occupied by a range of healthcare tenants that provide primary care, ophthalmology, cardiology, podiatry, lab, endovascular surgery, mammography, hand and general surgery, nephrology, oncology, imaging, dermatology, and gastroenterology services. The mix of tenants allows for a strong referral network within the facility.
Katy Internal Medicine and Katy Cardiology Associates are the largest tenants in the building, occupying 18 percent and 10 percent of the gross leasable area, respectively. The abundance of private-practice tenants (not employed by a health system) allows for future credit enhancement, should they be acquired. Occupants with a national presence include LabCorp, US Oncology, and Quest Diagnostics.
The seller of the asset, Katy Med-Arts Partners Ltd., was a partnership of more than 20 physicians associated with practices occupying the building. Prior to going to market, Cushman & Wakefield consulted these physicians on approaching their tenants to negotiate lease terms that would maximize the value of the building upon sale. By securing longer terms, fixed rent escalations, and converting gross leases to triple-net, significant value was added to the property. The buyer is a private equity-backed healthcare real estate investor.
Inclusive of the Katy Medical Arts transaction, Gino Lollio and Scott Niedergang have facilitated the sale of eight medical office buildings in the Houston market over the last 36 months. This equates to an aggregate sales volume of $116 million within the Houston MSA. Previous transactions include a portfolio sale of Memorial Hermann and UT Physicians assets in Sugar Land and Richmond for $58 million and the $40.4 million sale of a Memorial Hermann Surgery Center and Rehab Hospital in Katy.