Cushman & Wakefield facilitated the deconversion and sale of the Fletcher Drive Medical Center in Elgin, Illinois. At closing, the buyer—California-based private equity real estate investor IRA Capital—collapsed the condo association and converted the asset to a standard multi-tenant medical office building.
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, the deal’s architects, Gino Lollio and Scott Niedergang of Cushman & Wakefield ‘s healthcare capital markets team, consulted the condo association to maximize the value of their individual units by pursuing a portfolio sale of all the units simultaneously.
“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,” says Niedergang. “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.”
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 with a certificate of need in-place. The building was fully occupied at time of sale.
“Opportunities to acquire 100 percent occupied medical office buildings with a strong mix of synergistic tenants are few and far between in the Chicagoland market,” said Lollio. “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.”
“IRA Capital has been an active investor in the healthcare real estate space, which represents approximately 25% of the firm’s portfolio,” said Amer Kasm, principal and co-founder of IRA Capital. “We were most attracted to the building because of its synergistic mix of successful medical practices. Our firm understands that there are major changes occurring within the healthcare landscape, and part of our acquisition strategy includes identifying opportunities where we can best position our tenants to be the most successful as the delivery model continues to shift.”