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Hot Property: Nice scale to four-MOB HSA portfolio

Portfolio totals 143,228 square feet in the Chicago and Minneapolis areas

Name: HSA PrimeCare Portfolio
Number of buildings: 4
Square feet: 143,228
Metro areas: Chicago, Minneapolis
Occupancy: 93.6 percent
Avg. remaining lease: 7.7 years
Avg. year built: 2007
Brokerage: JLL
Lead broker: Brian Bacharach

As we’ve noted numerous times on the pages of Healthcare Real Estate Insights™, many medical office building (MOB) investors, especially those that are larger and/or looking to enter the space, prefer to make acquisitions that offer instant scale.

The 45,853 square foot Plymouth City Center Medical Building in Plymouth, Minn., is one of four buildings being offered as part of the HSA PrimeCare portfolio.

In other words, they are looking for portfolios.

One recent offering, from a well-known healthcare real estate (HRE) development and full-service firm, fits the bill.

The four-building offering with a total of 143,228 square feet comes by way of Chicago-based HSA PrimeCare, a developer and manager of healthcare facilities with a portfolio totaling more than 1 million square feet in eight states.

The buildings being offered are in the Chicago and Minneapolis metropolitan areas, with two of the buildings being in Indiana.

According to the team marketing the portfolio, the national Healthcare Capital Markets practice with Chicago-based Jones Lang LaSalle (NYSE: JLL), the 93.6 percent occupied portfolio offers a “desirable mix of triple net and modified gross leases.”

The JLL team, which is being led by Managing Director Brian Bacharach for the offering, notes that the “current ownership has developed, operated, maintained and managed the properties to the highest standards, creating strong tenant demand and hospital relationships and reducing the need for capital to renovate and update” the facilities.

For the most part, the MOBs are occupied by primary care and other physician specialists. The portfolio includes:

 45,853 square foot Plymouth City Center Medical Building, 15655 37th Ave. North, Plymouth, Minn. It is 93 percent leased and was built in 2014.
 52,950 square foot Advocate Southwest MOB, 18210 La Grange Road, Tinley Park, III. It is 89 percent leased and was built in
2002.
 13,200 square foot Crown Point MOB, 11456 South Broadway, Crown Point, Ind. It is fully occupied by Chicago-based APAC Centers for Pain Management and was built in 2006.
 31,225 square foot Coffee Creek Professional Office Building, 3100 Village Point Road, Chesterton, Ind. It is fully leased and anchored by Plano, Texas based U.S. Renal Care; built in 2007.

According to data from the commercial real estate research firm Real Capital Analytics (RCA) Inc., the properties are controlled by a joint venture (JV) partnership of HSA PrimeCare and San Antonio based USAA Real Estate. The JV acquired the Chicago-area MOBs in 2016 and the MOB in Plymouth in 2017.

In addition to being maintained to what JLL calls “institutional quality,” the portfolio is occupied by a number of strong tenants. Those include, in the Plymouth MOB, Minneapolis-based Fairview Health Services, with an A2 credit rating from Moody’s Investment Services, and North Memorial Health Care, with a Baa1 rating. Brooklyn Park, Minn.-based North Clinic also occupies space in the building.

In Tinley Park, outside of Chicago, the MOB houses services offered by Downers Grove, III.-based Advocate Health Care, with an Aa2 rating.

The JLL team says that the portfolio is being offered without any mortgage debt, “allowing investors the opportunity to take advantage of historically low interest rates.”

The MOBs “are situated in some of the most desirable communities of the Midwest – suburban Chicago and Minneapolis,” JLL notes. “Locations are in high traffic areas offering well established economies with strong employment and wealth characteristics that offer an attractive payer mix to healthcare providers and investors.”

John B. Mugford

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