McShane Takes On Seven-Building Med Portfolio

ST. LOUIS-McShane Medical Properties is taking over the management of a seven building, 404-229-square-foot medical office complex here. The offices support the adjacent St. Anthony’s hospital, which leases about half of the seven properties. McShane is part owner of the complex.

The properties include four on-campus medical office buildings, including the 115,483-square-foot Physicians Office Center, the 103,039-square-foot Medical Plaza, and Medical Office Buildings A and B, totaling 89,744 square feet. The assignment also includes three off-campus buildings, including the 28,157-square-foot Urgent Care Center, the 49,660-square-foot Lemay Urgent Care Center and the 18,146-square-foot Arnold Urgent Care Center.

McShane, partnered with Nationwide Health Properties, purchased the office complex back in December 2007. However, this was the joint venture’s first purchase, and the company wasn’t ready to manage property, said Ray Braun, president of McShane’s medical office arm. “At the time we didn’t have economies of scale to take on that assignment,” he tells GlobeSt.com. “Also, CB Richard Ellis was doing a good job there.” It wasn’t until the partnership picked up 12 medical buildings throughout suburban Chicago’s Lake County, affiliated with the Advocate Condell healthcare system, that McShane started to form a medical office management team, Braun says.

He says the St. Anthony’s medical offices are about 93% leased, “though they were at 85% leased when we acquired them.” The managers are keeping up maintenance but don’t have a large improvement plan, Braun says. Instead, the firm is vying to be selected by St. Anthony’s to construct at least one or more of a five-building expansion. The hospital’s new master plan includes five 120,000-square-foot buildings, with the company ready to pull the trigger on at least one of the buildings soon.

Braun agrees that he sees demand for medical office increasing, but with potentially different tenants. “We’re seeing an increase to almost 50% of doctors looking to become salaried employees of the hospitals, instead of being on their own. A lot of demand is coming from the hospitals themselves, there are buying out practices,” he says.