Physicians Realty Trust Spending $19.5M on Two Indiana Assets

Carmel Medical Pavilion

Physicians Realty Trust, a healthcare REIT that acquires, develops, owns and manages healthcare properties that are leased to physicians, hospitals and healthcare delivery systems, committed $19.5 million toward the acquisition of two Indiana healthcare facilities at the end of April.

On April 30, Physicians Realty Trust closed on the acquisition of the South Bend Orthopaedics Medical Office Building in Mishawaka, IN. The fully-leased, 45,198 square foot facility was acquired for $14.9 million.

Developed in 2007 and fully occupied by South Bend Orthopaedics, the property realizes $1,160,232 – or $25.67 per square foot – in annualized based rent. SBO’s lease extends through July 2022 and has 3 percent annual increases in the rent.

South Bend Orthopaedics (SBO) is an orthopaedic specialty group featuring a medical staff of over 20 board-certified orthopedic physicians. SBO’s practice size and history dating back to 1947 also makes it one of the state’s leading orthopaedic specialty groups. SBO specializes in joint replacement, sports medicine, rehabilitation, physical therapy, and pain management procedures for spine, shoulder, back, hip, hand, knee, foot and ankle procedures.

On April 24, Physicians Realty Trust entered into an agreement to acquire the 28,572 square foot medical official building known as the Carmel Medical Pavilion, which is located at 13431 Old Meridian Road in  Carmel, IN, for $4.6 million in cash and common units of limited partnership units in its operating partnership.

The REIT expects this acquisition to close in May 2014. There can be no assurance that it will complete this transaction.

Developed in 1992, the fully-leased Carmel Medical Pavilion generates $350,333 – or $12.26 per square foot – in annualized based rent.

The asset is located on a St. Vincent Health ground lease adjacent to St. Vincent Carmel Hospital, according to Cornerstone Companies, which says it is anticipating a 225% return on the sale the property.

When Cornerstone Leasing and Development initially got involved with the property, it had only two tenants and 7,455 square feet leased. Cornerstone Companies worked with a local architect to design a lobby and entrance that would modernize the layout and aesthetics of the building. It also assembled a plan to replace outdated mechanical and electrical systems and address differed maintenance issues.

Though it has not yet entered into binding letters of intent or other agreements, Physicians Realty Trust says it is reviewing a number of potential acquisition and investment opportunities with the owners of 22 medical office buildings and two specialty surgical hospitals located in seven states containing more than 707,000 rentable square feet in the aggregate. The buildings are currently 94 percent occupied in the aggregate.