SUGAR LAND, TX-A joint venture between Trammell Crow Co. and Memorial Hermann Healthcare System has obtained $27.4 million in construction and mini-perm financing to build two 125,000-sf medical office buildings in Sugar Land and Katy. The all-in development cost is estimated at $37 million.

Memorial Hermann Healthcare System contributed the acreage to the joint venture–roughly 1.5 acres. TCC affiliate, Partners Health Trust, will develop and own the five-story buildings, now under construction at 23020 Katy Freeway on Memorial Hermann’s new hospital campus and 17510 W. Grand Parkway South in Sugar Land. Memorial Hermann, which operates 12 acute-care hospitals, will occupy about 25% of the buildings. The projects will deliver in spring 2006.

“We decided to become involved in the deal because of the sponsorship,” says Angela Mago, national manager of the healthcare finance group for KeyBank, a division of Cleveland-based KeyCorp. “Trammell Crow is a well-known developer and Memorial Hermann is an outstanding healthcare system.”

Mago and Jean Kaufman, also with the healthcare finance group, along with Rick Harsch in KeyBank’s Houston office arranged the financing. “These are the first medical office buildings that we have financed in Houston,” Mago tells

The 36-month loan, with two 12-month extension options, has a floating rate over Libor. The financing represents about 70% of the loan to cost, Mago says. “We see joint ventures like this as a growing trend as hospitals and healthcare organizations seek capital for projects,” she says, pointing out the arrangements allow a hospital to get new facilities without shouldering the entire financial burden or landlord responsibilities.

Harsch says the lending environment was highly competitive for the deal. “KeyBank’s success on other projects with Trammell Crow made the difference,” he says.

Matt Khourie and Aaron Thielhorn with Trammell Crow are heading up project management. Houston-based Morris Architects designed the buildings. Based on the local suburban markets, industry sources say comparable medical office space runs from $22 per sf to $26 per sf.

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