Institutional Property Advisors (IPA), a division of Marcus & Millichap specializing in serving institutional and major private real estate investors, announced the $58 million sale of a portfolio of fullyleased medical office properties outside of Houston, Texas: Memorial Hermann Surgical Hospital and Physicians Pavilion in Sugar Land; and UT Physicians facilities in Sugar Land and Richmond.
Scott Niedergang and Gino Lollio, senior directors with Institutional Property Advisors (IPA) Healthcare, procured the buyer, a major U.S. public pension fund and its strategic adviser, Everest Medical Properties, and represented the seller, a partnership including 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 continues to create opportunities for buyers and sellers alike,” said Niedergang. “Our consultative approach and health care 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 in the negotiations of new leases mitigated the short-lease term rollover risk.”