DOVER – A joint venture of investors has acquired the Eden Hill Medical Center for more than $36 million, according to county land records.
The Class A, three-story medical office building at 200 Banning St. was purchased Oct. 31 by a venture that includes MedProperties Realty Advisors LLC, Capital Security Advisors and Physicians Realty Trust. It is the first facility in Delaware bought by the group, which announced the acquisition on Wednesday, Jan. 8, but did not disclose the sale price.
The 140,205-square-foot center is less than a mile from Bayhealth Kent General Hospital and is currently 94% leased to 23 tenants, including some practices affiliated with Bayhealth. The facility also includes a 24,000-square-foot surgery center and an ExpressCare urgent care center.
The seller of the property was Eden Hill Medical Center LLC, which was formed by some of the physician group tenants that originally developed the building in 2008 as part of a 23-acre master planned site that is owned by an affiliated entity. To date, the only other facility developed on the site is a rehabilitation/skilled nursing facility.
In a statement, Darryl Freling, managing principal of MedProperties Realty Advisors, a national health care real estate private equity firm headquartered in Dallas, said the off-market sale was completed after Dennis Irvin, CEO of Capital Security Advisors who had a relationship with the seller, connected MedProperties to the opportunity.
Freling added that Eden Hill’s strong leasing history, connection to Bayhealth, successful surgery center and Delaware’s status as a Certificate of Need state played into MedProperties decision to invest, saying it “checked every box for us.”
Like 35 other states, Delaware requires state regulatory approval for major capital expenditures for certain health care facilities. While Certificate of Need programs aim to control health care costs by restricting duplicative services, they also in turn limit prospective competing businesses and make investments more valuable for existing services.
Capital Security Advisors, a Boston-based investment management and advisory firm focused on infrastructure and real estate, holds an equity position in the joint venture. Irvin said in a statement that his firm had a purchase agreement but needed a partner with capital and health care real estate experience and were recommended to contact MedProperties. He called the resulting sale a “successful partnership.”
Officials reported that MedProperties is the majority owner and manager of the joint venture, with Physicians Realty Trust, a Milwaukee-based, self-managed health care real estate investment trust that acquires, owns and manages health care properties, committed to a 49% equity stake in the project.
In a statement, John Thomas, president and CEO of Physicians Realty Trust which is also known by its New York Stock Exchange symbol DOC, called Eden Hill Medical Center “an outstanding example of the future of health care delivery, with a health care ecosystem anchored by an ambulatory surgery center and opportunity for future growth.”
Freling noted that the transaction took months of legal work to revise and amend aspects of the original, 23-acre master plan. The original purchase agreement on the property was signed in June 2019, according to Kent County records.
“We had to make a number of changes, including breaking out the [medical office building] with a separate tax ID, and creating a [reciprocal easement agreement] that will govern all of the parcels within the master plan,” he said, noting the joint venture also negotiated rights of first refusal on the neighboring, undeveloped parcels. “We’ve been building close relationships with the landowner, tenants and other local health care providers, so we’re excited to work with them on potential future development opportunities on the site.”
A mortgage underpinning the sale was provided by Capital One, with a participation by Siemens Financial Services, to Medcore Realty Eden Hill LLC, a subsidiary of MedProperties, according to county deed records.
A later press release from Capital One detailed that the loan included initial funding of $36.05 million, a $2 million holdback for tenant improvements and leasing commissions, and a $500,000 capital expenditure holdback.
DBT Research Editor Mike Rocheleau contributed to this article.
By Jacob Owens