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Colliers’ExpertiseLeadsCDCinAcquisitionofPrimeMedicalFacility

Colliers International
Colliers International Accelerating success.
9mo Toronto, Ontario, Canada Story
Colliers’ Expertise Leads CDC in Acquisition of Prime Medical Facility

Colliers’ Washington, D.C., market knowledge and unwavering client focus has created new opportunities for its longtime client, Capital Digestive Care, providing measurable cost savings, increased efficiency and speed to market.

It’s not easy to acquire a suitable healthcare facility, especially in a highly competitive market. But Colliers’ expertise helped Capital Digestive Care do just that — in a sought-after, high-profile medical corridor near Washington, D.C.

Capital Digestive Care, which is headquartered in Silver Spring, MD, is the largest independent gastroenterology group in the Mid-Atlantic and Northeastern states, and one of the largest in the country. Established in 2009, it now boasts 17 office locations with more than 65 doctors and advanced care practitioners.

Adam Schindler, Executive Vice President, Washington, D.C. region with Colliers, has worked with the group for several years and is well acquainted with the physicians and their needs.

“Four of the Capital Digestive Care offices in the D.C. area were positioned within a mile of each other,” explains Mr. Schindler. “About four years ago they prepared a strategic plan to consolidate these offices into a large medical complex that they would acquire. But it’s difficult to acquire institutional-quality buildings in the national capital area.”

Kevin Harlen, Capital Digestive Care’s Chief Operating Officer, said the organization’s physicians saw a number of benefits to the consolidation plan, as well as the acquisition, which was their first. “The consolidation plan made strategic sense financially and operationally,” says Mr. Harlen. “We were paying four separate leases in the same zip code. There was no question that the company was better served by consolidating that footprint and having an ownership stake in the property.”

The group’s CEO, Dr. Michael Weinstein, added that the opportunity to improve the patient experience was also a driving factor behind the move. The newly acquired facility will serve as a patient hub housing a large clinical office as well as the organization’s procedural centers and many ancillary services. “We planned to combine all of our services for additional patient convenience and accessibility, which is especially important in an area as busy as the national capital region.”

Beginning in late 2014, Mr. Schindler and his team began coordinating the timing so that the leases of the various Capital Digestive Care facilities expired at about the same time, allowing the staff and services to efficiently move into a newly acquired facility. Mr. Schindler noted, however, that it didn’t quite turn out that way and that some of the leases that expired later had to be restructured into the acquired property. At the same time, the team began researching off-market buildings that would be appropriate for the group.

Mr. Harlen said the facility had to have a number of essential features and characteristics. “The location was as important for our patients and staff as it was for our physicians,” he says. “It had to be in a centralized metro hub that was easy to access with convenient parking and nearby businesses and restaurants. It also had to have enough square footage to consolidate three of our existing clinical offices onto one floor.”

In early 2017, Capital Digestive Care and the Colliers team zeroed in on a 100,000-square-foot, two-building medical office complex at 15001 and 15005 Shady Grove Road in Rockville, MD, about 19 miles north of Washington, D.C.

The medical complex is in a prime location in Montgomery County’s Life Sciences Corridor near major healthcare facilities, including Shady Grove Adventist Hospital, the National Cancer Institute and Kaiser Permanente. It also houses a good tenant base, including a Johns Hopkins Medicine physicians group, an MRI center, an OB-GYN office, an eye clinic and about 20,000 square feet occupied by Capital Digestive Care. But Mr. Schindler said the building also had some challenges.

“Initially, the owner didn’t want to sell the buildings. They wanted to re-tenant them and hold them long-term,” he says. “We also realized that if the owner did sell, it would be a daunting task for Capital Digestive Care to be the sole owner, so we recommended they form a joint venture with one or more investor partners. Beginning in late March 2017, we had a four-month partner selection process, chose a good firm and stepped out of the way to let them negotiate on our behalf. They convinced the owner to sell and negotiated the best possible terms.” That partner was Anchor Health Properties, a healthcare real estate development, management and investment firm headquartered in Charlottesville, VA.

After the contract for the property was signed in August 2017, Capital Digestive Care agreed to add a third joint venture partner/co-owner — MedProperties Holdings LLC, a nationwide real estate private equity firm headquartered in Dallas, TX. Mr. Schindler said equity for the acquisition also came from more than 40 of the group’s physicians and senior management members.

The physicians and three joint venture partners closed on the medical complex in May of this year, with plans to consolidate their current services and execute the move in the next 12 -24 months. The group is also working with an architect and Anchor Health to remodel both buildings’ common areas and parking and to develop space for additional services, including an infusion center and diet and nutritional services.

In addition to this challenging, four-year-long transaction, the Colliers team regularly manages a wide variety of healthcare real estate projects that help Capital Digestive Care reduce costs and operate more efficiently. Activities include a project in 2013 to renegotiate the lease on a pathology facility in Bowie, MD, and a 2014 project to restructure two ambulatory endoscopy center spaces. Both resulted in significant savings, according to Mr. Schindler.

These projects are successful, Mr. Schindler says, because of Colliers’ market knowledge and understanding of healthcare real estate strategy. He added, “We’re familiar with Capital Digestive Care’s organization and know how to navigate their structure. We also know the players and how to work with them and get things done.”

Asked what differentiates Colliers from other firms, Mr. Harlen notes, “They have in-depth knowledge of our organization, our specific market and the types of facilities that would be appropriate for us. In addition, they serve as a valued advisor, understanding the amenities and space requirements we need today but also what we might need in the future.”

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Colliers International
Accelerating success.

Colliers International (NASDAQ and TSX: CIGI) is an industry-leading global real estate services company with 15,000 skilled professionals operating in 68 countries.

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