The 62,000 square foot healthcare facility on the campus of Doctors Medical Center in Modesto, Calif., is 100 percent leased by multi-tenant physician practices
MODESTO, Calif., and DALLAS, Aug. 24, 2016 – It’s not often an investor can acquire a 100 percent leased, on-campus medical office building (MOB) at a value-add price. But MedProperties Holdings LLC and Cypress West Realty Partners LLC have done just that with the recent acquisition of the 62,000 square foot McHenry Medical Building at 1541 Florida Ave. on the campus of the Doctors Medical Center in Modesto.
The joint venture partners closed on the acquisition of the property on July 26, which has been added to the portfolio of investments of MedProperties Investment Partners Fund.
MedProperties is a Dallas-based private equity firm focused exclusively on investing in healthcare real estate. Cypress West is a Rancho Santa Margarita, Calif.-based firm that acquires, develops and manages healthcare properties. This is MedProperties’ third transaction with Cypress West and the 14th investment by MedProperties Investment Partners Fund.
Darryl Freling, MedProperties Managing Principal, says the opportunistic acquisition makes great strategic sense for the partners because of the building’s excellent location and solid anchor tenants.
“The McHenry Building is the market leader in the area because it’s the only MOB on the campus of the very successful 465-bed Doctors Medical Center. The building is 100 percent leased, yet was available at a value-add price due to a need for some fairly extensive capital improvements.”
In light of the anticipated financial upside, Mr. Freling noted that the acquisition fits well with the discretionary fund’s goals.
“This acquisition will provide MedProperties Investment Partners Fund with immediate cash flow but also additional financial benefits over the long term through our value-added strategy. This includes implementing more than $1 million in initial capital improvements to the roof, elevators and HVAC system, as well as cosmetic upgrades, which should contribute to higher tenant satisfaction and renewal rates, as well as substantial facility appreciation.”
“The McHenry Medical Building is occupied by some of the highest quality multi-specialty physician practices in the region,” says Cypress West CEO Chris Cumella. “First Choice Physician Partners is the largest tenant, occupying 32,000 square feet or about 55 percent of the facility. The other tenants offer a diverse mix of healthcare specialties and also have strong ties to – and excellent working relationships with – the hospital.”
The McHenry Building’s tenancy includes 26 physicians from First Choice Physician Partners who specialize in a wide range of services. This includes cardiovascular surgery, urology, internal medicine, hematology/oncology, orthopedic surgery, pediatrics, gastroenterology, otolaryngology, rheumatology and family medicine. The building also has clinical laboratory and research space.
The adjacent Doctors Medical Center is a 465-bed, multi-specialty, Level II Trauma Hospital operated by Tenet Health, one of the leading hospital operators in the country. Doctors Medical Center is the third most profitable hospital in Tenet’s nationwide network.
Erik Tellefson, Managing Director, Medical Properties, for Capital One, arranged debt financing for the acquisition.
About MedProperties
MedProperties Holdings LLC is a Dallas-based healthcare real estate private equity firm with offices in Greenville, South Carolina that provides qualified developers and owner/operators with a consistent source of equity investment for the development of new, or value-added acquisitions of existing, healthcare-related real estate projects, including both multitenant medical office buildings and single-tenant, specialty facilities, as well as selected senior housing communities. MedProperties invests through its discretionary funds: MedProperties Capital Partners LP, MedProperties Investment Partners LP and MedProperties Senior Housing Fund I LP, and is dedicated solely to healthcare real estate. For further information on MedProperties, please visit www.medpropertieslp.com.
About Cypress West Partners
Cypress West Partners LLC was formed through strategic affiliations with institutional investors, high-net worth individuals and family offices with the purpose to acquire, develop and manage healthcare properties across the Western United States. We believe that the greatest opportunity in healthcare is to understand and implement on all aspects of what makes a high-performing asset.
Our team is highly experienced at working across the healthcare spectrum, from institutional owners to hospitals and individual doctors. For this reason, we see things that others don’t and leverage that knowledge throughout our portfolio. The strength and legacy of our business model is in our method for successfully acquiring the right medical real estate assets backed by solid data analytics. We then focus on a strategic leasing and management plan to increase value at the property and investor levels. To learn more about Cypress West Partners, please visit cypresswestpartners.com.
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