Lowell MOB Sale to LA Firm Yields $11.3M Via Newmark Exclusive Drawing National Audience

March 11, 2019 — By Joe Clements

VA Medical Center, Lowell MA

LOWELL—Continuing an eventful start to 2019, Newmark Knight Frank’s Medical-Academic Practice Group has closed on the $11.3 million sale of a mission-critical outpatient facility here that is 100 percent leased to the US Department of Veterans Affairs’ regional healthcare system. Winning bidder Catalyst Capital joined a “Who’s Who” of national players in medical office and government-related property investments chasing the coveted asset, NKF Managing Director and practice group member Michael R. Greeley tells Real Reporter in acknowledging the trade.

“Interest in this asset was very strong,” says Greeley, the lineup of suitors also featuring local capital active in the MOB realm eager to secure the 38,500-sf building whose Florida-based seller, a private partnership that hired NKF last autumn to market 130 Marshall Rd., “has been excellent stewards of the asset for almost 20 years,” explains Greeley, an NKF Managing Director who adds, “We were very pleased with the outcome of this process.”

Other members of the specialized NKF team are founding member and Executive Managing Director Frank Nelson; Managing Director James Tribble and Senior Financial Analyst Casey O’Brien, the contingent working closely with Co-Head of US Capital Markets Robert E. Griffin Jr.

The same crew took the lead in another MOB transaction announced earlier this month, a Connecticut listing for the Davis Cos. of its Westport Center for Health in Westport, its $18.7 million exchange involving a 38,000-sf asset anchored by Yale New Haven Health’s Northeast Medical Group. The complex recently underwent an extensive renovation centered around demolition of one structure to create a four-building campus that now has sufficient parking to meet the needs of clients and staff, outlines Greeley, while the Davis Cos. also reconfigured and renovated building interiors to create a more efficient, modern footprint.

“Davis Companies should be commended for recognizing the need for a best-in-class medical office asset in a market where much of the supply is decades-old, and for the successful execution of an ambitious healthcare conversion,” relays Greeley, his team selecting Healthcare Trust of America the winning bidder as that industry heavyweight continues to aggressively grow its Northeast portfolio. Such was the caliber of prospects drummed up for the development which NKF also highlighted for its “blue-chip tenant roster” and “a truly beautiful setting” overlooking the Saugatuck River, a vista which provides all of the tenants with dramatic water views.

Sale of the property at 323-329 Riverside Ave. was aided by NKF Managing Directors Tim Rorick and Jennifer Schwartzman.

The Connecticut and Lowell conclusions follow another deal the Medical-Academic group finalized in the early going of 2019, that being 31 Heath St. in Boston’s Jamaica Plain neighborhood acquired by a homegrown investor whose principals include Jasbir Bhogal and Thomas Calus. It was purchased at a consideration of $5.95 million and backed by a $4.2 million loan from Rockland Trust Co. The 42,000-sf building is a historic structure dating to 1910 with unique architecture located on a half-acre lot “steps from” the MBTA Orange Line stop at Jackson Square. It was divested by a private healthcare group which occupied space in the building but is ceasing operations and took advantage of the popularity of MOB to secure pricing in excess of $140 per sf.

The new owners of 31 Heath St. are known for multifamily investment but took on an urban hotel project recently,. The Heath Street venture comes amid a growing need for back office space among denizens of the nearby Longwood Medical Area, as well as the Mission Hill section of Boston a short drive away where several leading healthcare organizations “are maxed out” of space in their primary locations. “I expect they will do well in this climate,” Greeley says of the buyers, 31 Heath Street Realty Partners LLC. Physically, the building benefits from “flexible floorplates” and an efficient layout, he adds.

Even with the series of closings, Greeley says there remain several other NKF-listed opportunities for investors to buy into the MOB scene in metropolitan Boston, among them a pair of assets his group is now in the early stages of marketing for separate clients, one at 2 Forge Park in Franklin a “bite-sized core asset” expected to trade in the $5 million range and a larger listing north of the city in Haverhill where a fully leased 63,500-sf facility 88 percent occupied by a Partners Healthcare affiliate could appeal to investors in the Middle Market realm seeking investments around $15 million to $16 million.

“We expect a deep buyer pool for that property,” says Greeley, anticipating the enthusiasm from One Park Way’s longtime standing as the flagship property of Pentucket Medical Center which NKF deems “the Merrimack Valley’s most recognizable healthcare address.”

The purpose-built facility has a “synergistic tenant roster” giving healthcare consumers a broad base of medical services next to the MBTA commuter rail in a building at which Partners just exercised an option to lease for another five years. Buttressed by “complementary practices” in the remaining space, the Partners footprint houses over 55 physicians, 40 nurse practitioners and 400-plus employees. Clinical infrastructure includes CT Scan and X-Ray equipment plus a fully equipped cardiac testing unit, modern endoscopy center and comprehensive laboratory services.

Between those two buildings just now ramping up in advance of a call-for-offers, NKF has other deals at various levels of progress, including one under contract and others about to enter the pipeline which Greeley could not elaborate on prior to launch but which he maintains will also generate traffic. “It is a busy time right now with great demand for medical office and related (properties),” Greeley reports, expressing confidence the region’s renowned medical sector will draw other national titans to do business against an equally sophisticated homegrown pool of MOB afficiandos. “We are looking at a busy spring,” Greeley says, estimating upwards of $60 million currently being pitched or about to enter the frenetic fray.

According to Greeley, the Lowell exercise offered no reason to portend an easing of demand. “Greater Boston continues to be one of the best—if not the best—markets in the country for (MOB) investment,” he says. That particular asset category at 122-130 Marshall Rd. does tend to attract a specialized crowd that favors a government-oriented element evident there in the long-term VA lease at a facility constructed for that very purpose back in 1988. The activity there, plus the Franklin and Haverhill properties, are also underscoring the interest for that asset class extends beyond the urban core, Greeley observes, albeit with more scrutiny on being a stablized, cash-flowing investment.

Even at barely 10,000 sf, for example, the fully leased 2 Forge Park is expected to garner robust demand from a certain investment contingency including 1031 Exchange capital and high-net-worth investors.

The buyer of 130 Lowell Rd. is JACO Lowell Realty Inc., based in Panama City, FL, while VAF 122 Marshall Road LLC is headquartered in Los Angeles. NKF’s client had owned the building since April 2001 when it could be had for $3.8 million.