Gino Lollio and Scott Niedergang of our Healthcare Capital Markets team facilitated the sale of Fletcher Drive Medical Center located 40 miles northwest of Chicago in Elgin, Illinois, to California-based private equity real estate investor IRA Capital.
Fletcher Drive Medical Center consisted of ten medical office condominiums totaling 40,000 Square Feet that were individually owned by various physician groups. Prior to sale, Scott and Gino consulted the condo association to maximize the value of their individual units by pursuing a portfolio sale of all the units simultaneously. At closing, IRA Capital collapsed the condo association and converted the asset to a standard multi-tenant medical office building.
As part of the sale, each physician group agreed to lease back their units at lease terms ranging from 5 to 10 years. Tenants in the facility included Advocate Health Care, Illinois Gastroenterology, Urology, Ltd., Elgin Internal Medical Associates, and Elgin Gastroenterology Endoscopy Center. Elgin Gastroenterology Endoscopy Center is an ambulatory surgery center (ASC) with a certificate of need (CON) in-place. The building was 100% occupied at time of sale.
Niedergang comments: “By agreeing to pursue a sale together, the condo owners at Fletcher Drive Medical Center were able to realize a pricing premium. The buyer pool for this asset in its entirety is much larger than a one-off medical office condo sale. Our team was able to add significant value by creating a streamlined process that allowed for valuation consultation, new lease structuring, marketing, offer negotiation, and a due diligence process for each condo unit owner simultaneously.”
Lollio adds, “Opportunities to acquire 100% occupied medical office buildings with a strong mix of synergistic tenants are few and far between in the Chicagoland market. The inclusion of an ambulatory surgery center combined with the strategic location between Advocate Sherman Hospital and Presence Saint Joseph Hospital made this a unique investment that saw significant interest from the market.”