Davis Healthcare, on behalf of its open-ended Davis Medical Investment Fund, acquired a two-building, 88,295-square-foot healthcare real estate portfolio known as CoralBirch with assets in Coralville, Iowa and Maplewood, Minnesota, for a combined purchase price of $34 million.
More than 70% of space in the buildings is leased to high-credit hospital systems.
With this acquisition, the Fund now encompasses 17 single and multi-tenant, off-campus ambulatory care buildings totaling more than 750,000 square feet of space. The assets under management total approximately $275 million. DMI targets expanding the fund to $500+ million over the next few years. The portfolio of properties is 97% leased with a weighted average lease term (WALT) of eight years.
Coralville West Medical Building
Coral West Medical Building, located at 2769 Heartland Avenue, is a three-story, 60,351-square-foot medical building in close proximity to the University of Iowa Campus. Davis acquired the property for $24,150,000, or approximately $400 per square foot.
This represents DMI’s first acquisition in the state of Iowa.
At closing, the building was 97% leased with more than 65% of the space leased to the University of Iowa. Among the services provided by University of Iowa Healthcare are primary care and internal medicine, obstetrics and gynecology, neurology, imaging, rehab and dermatology, among others. Additional tenants of the building tenants are medical practices focused on obstetrics, radiology and rehab.
The weighted average lease term (WALT) of tenants occupying space in the building is eight years. Approximately 2,100 square feet of space is available for lease.
The Class A building, which is located immediately north of Interstate 80 and west of Coral Ridge Avenue, was originally developed in 2010. The building’s common areas and restrooms were renovated in 2022 with new wall covering, floor coverings, furniture and artwork.
Birch Run
Birch Run Medical Building, located at 1747 Beam Avenue in St. Paul, is a 27,944-square-foot, single-story building. The purchase price was $9,850,000 or approximately $352 per square foot.
The building is fully leased, with BBB+ S&P rated MHealth occupying 86% of the building. Prior to the acquisition of Birch Run by Davis, MHealth executed a long-term lease to bring a neurology group to the building. Other specialty areas within MHealth’s practice at the building include a spine center and a dental implant center.
With the execution of that most recent lease, the WALT at Birch Run improved to 10 years.
Birch Run is less than ½ mile from MHealth’s Fairview St. John’s Hospital and adjacent to Maplewood Mall. The building is located in an area with dense demographics and numerous retail amenities.
Among the additional features of the building, which was developed in 2010, include high ceiling heights, abundant natural light, superior visibility and access to the property.
“Despite the current high cost of capital and persistent uncertainty in the financial markets we continue to selectively pursue attractive investment opportunities and look to strategically expand our portfolio as offerings make sense,” said Davis.
Eric Gunderson, Alerus Financial, and Scott Sullivan, American National Bank, provided financing for the acquisitions in Minnesota and Iowa, respectively.
