Sale of Salt Creek Campus Outside of Chicago is a Good Example of How Strong Investor Demand Remains for MOBs
With a number of other commercial real estate sectors still feeling the sting of the COVID-19 pandemic, including general office, retail and hospitality, MOBs are showing their strength and appeal as an investment vehicle.
A good example can be found in Hinsdale, Ill., an affluent Chicago suburb, where there was strong demand from investors for the four-MOB, 156,660 square foot Salt Creek Medical Campus.
According to Revista data, Chicago-based MBRE Healthcare and its longtime financial joint venture partner Kayne Anderson Capital Advisors acquired the 88 percent occupied campus on August 27 for $50.9 million.
The seller was Chicago-based MedProperties Group, which began accumulating and improving the buildings on the campus in 2012. It acquired three of the facilities — making substantial improvements to them over the years — and developed a new MOB at 8 Salt Creek Lane in 2016 as a build-to-suit for locally based Edward-Elmhurst Health.
Today, 33 percent of the space on the outpatient campus is occupied by credit-rated health systems, according to the brokerage team that represented the seller, the U.S. Healthcare and Life Sciences Capital Markets team of CBRE Group Inc. (NYSE: CBRE).
“Investors are flocking to defensive positions, and the Salt Creek Medical Campus is a great example of an investment offering durability of income through well-positioned (healthcare) tenants,” said Christopher R. “Chris” Bodnar, vice chairman with Lee Asher of the CBRE healthcare team.
While CBRE did not disclose the price nor the name of the buyer, Bodnar said, “We had a lot of demand given the location. Hinsdale is one of the most affluent suburbs in the Chicago market. In addition, the rent roll had a list of who’s who in Chicago: Edward-Elmhurst Health, AMITA Health, Adventist Health, University of Chicago Medicine and Rogers Memorial Hospital.”
Even with that strong tenancy, Mr. Bodnar says the new buyer has a good opportunity to increase the occupancy rate, adding that the campus will see increased demand for space from providers given the current “trend of many families leaving the urban core in search of more space in the suburbs.”
As noted, MOBs as an investment type continue to garner the attention of “more capital given its resiliency as a product type, which has been demonstrated through multiple cycles,” Bodnar noted. “Investors are looking for defensive positions right now and this campus provides an investor with great tenant credit and term.”
The Salt Creek Medical Campus, it should be noted, won the 2018 HREI Insights Award for the “Best Renovated or Repurposed Healthcare Facility.”