CHICAGO—A joint ventured fund managed by MBRE Healthcare has just bought a nine-building, 401,428 square-foot medical office portfolio in the Chicago region for $131 million from a group of physicians and a local developer. Many of the properties are located in affluent North Shore markets, and like many healthcare portfolios that hit the market these days, it attracted intense interest from investors across the US.

“We have an abundance of capital that is targeting healthcare real estate due to the strong fundamentals in healthcare right now,” Gino Lollio, associate vice president investments with Marcus & Millichap’s healthcare real estate group, tells GlobeSt.com. Along with John Smelter, senior director, and Scott Niedergang, associate vice president investments, Lollio procured the buyer and represented the seller, a partnership that includes physicians affiliated with Illinois Bone and Joint Institute, which anchors the portfolio.

“They are one of the largest orthopedic groups in the country and are dominant in the Chicago area,” he adds, a fact which further intensified the competition. 

“IBJI has a strong foothold in the Chicagoland market with 20 total locations,” says Smelter. “IBJI’s financial strength and long term leases allowed us to generate significant interest from private equity, institutions and REITs looking to acquire an extremely stable, institutional-quality investment.”

Tenants occupy 95% of the portfolio’s space with triple-net leases, the majority of which call for annual rental escalations ranging from two to three percent. Almost half of the rent roll has 10-plus years remaining. A few key assets within the portfolio are an 86,503 square-foot, two-story steel and brick medical facility in Morton Grove; a 60,500 square-foot building in Des Plaines; and lastly, a 40,011 square-foot Chicago building located along the Kennedy Expressway.

Other tenants in the portfolio include Advocate Health Care, NorthShore University HealthSystem, Resurrection Health Care, Metro Infectious Disease Consultants, and Pain Specialists of Greater Chicago.

The level of interest investors have shown this and many other portfolios is turning heads throughout the medical world. “Physicians who own their own real estate are starting to look around and say, ‘let’s find out the value of this property,’” Lollio says, although in this particular case the other members of the partnership were the driving force behind the sale. “It’s the best time we’ve ever seen.”

“It’s really forcing buyers to get aggressive with their pricing if they want to win an acquisition,” Niedergang tells GlobeSt.com.

“Our company’s platform and specialized marketing campaign generated a tremendous amount of activity but, in the end, the portfolio was acquired by a well-qualified and experienced local healthcare investment group,” Lollio adds. “MBRE Healthcare is the perfect buyer for this offering, as it appreciates the considerable value in owning and managing such a significant healthcare real estate investment in its own backyard.”