Project Description

Southwest Houston Medical Office Portfolio

Sugar Land, TX | Richmond, TX

Property Type:
Multiple Tenant Medical Office Building

Portfolio Sale Price:
$58,000,000

Square Footage:
146,651

Major Tenants:
Memorial Hermann Surgical Hospital, UT Physicians Sugar Land – Richmond Bone & Joint Clinic, UT Physicans Richmond – Richmond Bone & Joint Clinic

Highlights

•  Four Building Medical Office Building Portfolio | Located Outside of Houston in Sugar Land and Richmond, TX

•  Anchored by Memorial Hermann Surgical Hospital and UT Physicians

•  Memorial Hermann is Largest Nonprofit Healthcare System in Southeast Texas with 13 Hospitals and Numerous Specialty Programs and Services in the Greater Houston Area | UT Physicians Boasts 1,000+ Clinicians Certified in More than 80 Medical Specialties and Subspecialties

•  Brand New 10 Year Lease Extension by Memorial Hermann Surgical Hospital and Surgical Partners International | Brand New Five Year Leases with UT Physicians

•  All leases account for annual rent escalations calculated as the greater of CPI or 3.00% (greater of CPI or 2.00% at Memorial Hermann Surgical Hospital)

•  All CAM, taxes, and insurance expenses reimbursed by tenancy.  Portfolio operates as NNN with a reimbursed management fee

•  Sugar Land is one of the most affluent and fastest growing cities in Texas.  Five-mile average household incomes in excess of $130,000

Print Details

Contact Agents:

Scott Niedergang Managing Director Direct: (312) 338-7060 Cell: (312) 342-4495 scott.niedergang@cushwake.com
Gino Lollio Managing Director, Healthcare Advisory Practice | Capital Markets Direct: (312) 338-7061 Cell: (239) 810-4714 gino.lollio@cushwake.com

Texas Broker of Record:

Teddy Leatherman

Summary

Our team announced the $58 million sale of a portfolio of fully leased medical office properties outside Houston: Memorial Hermann Surgical Hospital and Physicians Pavilion in Sugar Land, Texas; and UT Physicians facilities in Sugar Land and Richmond, Texas.

Scott Niedergang and Gino Lollio procured the buyer, an institutional healthcare real estate investment group in partnership with US pension plan, and represented the sellers, a partnership of physicians and executives previously affiliated with Richmond Bone & Joint Clinic. Tim Speck, first vice president and district manager, is IPA’s broker of record in Texas.

 “As this transaction demonstrates, ongoing consolidation in the healthcare industry continue to create opportunities for buyers and sellers alike,” said Niedergang. “Our consultative approach and healthcare expertise allowed us to help a group of physician owners whose practice had been acquired by a health system maximize the value of the underlying real estate.”

In 2012, Memorial Hermann, the largest nonprofit healthcare system in Texas, acquired the Richmond Bone & Joint Clinic practice and assigned interest in two outpatient clinics – at 15035 Southwest Freeway in Sugar Land and 1517 Thompson Road in Richmond – to UT Physicians, a subsidiary of University of Texas Health. Also that year, Memorial Hermann entered into a development agreement with the seller to build what would become Memorial Hermann Surgical Hospital, located at 16902 Southwest Freeway in Sugar Land, and the adjacent Physicians Pavilion.

Prior to taking the portfolio to market, the IPA Healthcare team was able to advise ownership on the negotiation of a new 10-year lease with Memorial Hermann Surgical Hospital and its partner, United Surgical Partners International (USPI), as well as new five-year leases with UT Physicians at the outpatient facilities.  Before these negotiations and lease extensions, the surgical hospital had less than five years of lease term remaining and the UT Physicians leases were approaching expiration.

“The transition of tenancy from private orthopedic practice to profitable health system created a significant credit enhancement that increased the value of the portfolio,” said Lollio. “Our team’s involvement on the negotiations of new leases mitigated the short-lease term rollover risk.”

Our team has facilitated the sale of more than $98 million in healthcare real estate in the Houston area over the past 36 months. In 2015, the team brokered a similar transaction when the Memorial Hermann Surgery Center and Rehabilitation Hospital in Katy, Texas, were sold to an institutional buyer for $40 million.

 

Seller Profile: General Partnership between Developer and Practicing Physicians
Buyer Profile:  Institutional Healthcare Real Estate Investment Group in Partnership with US Pension Plan

Additional Photos

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