A healthcare real estate developer is showcasing the groundbreaking of a new medical center outside Chicago not only for its medical benefits, but for the method in which it was financed.
Tuesday’s groundbreaking for the Medical Services Building at the planned Silver Cross Hospital campus in New Lenox, Ill., marks the first project for a newly created healthcare real estate company that will use joint venture capital funding to pursue more projects. Company officials say the new capital structure gives them more capacity and flexibility in structuring financing for projects and clients.
When completed in late 2011, the $52 million, 182,000-square foot MSB will be part of a $400 million, 76-acre replacement campus for Silver Cross Hospital, located 36 miles outside of Chicago and in the middle of one of the 10 fastest growing communities in the United States. The six-story building will house, among other things, outpatient services and a Walgreens pharmacy.
The project is the first for the NexCore Healthcare Capital Corporation, a public capital company acquired by the Denver-based NexCore Group and some of its principal high-net-worth investors on Sept. 29. The new company will make use of joint capital partners, or project partners that typically make a co-investment of 5 percent to 20 percent of a project’s total equity, to fund new projects over the next year.
“We’re really excited about this new capital structure,” said Greg Venn, the NexCore Group’s president and CEO. “It gives us a viable, sustainable way to access the co-investment capital that our joint venture partners want us to provide for development and acquisition projects. The new structure also provides us with the necessary collateral and balance sheet to meet the stricter underwriting criteria of lenders who want borrower guarantees in this uncertain capital market.”
In the MSB project, NexCore is partnering with Heitman LLC, an institutional real estate firm with more than $23 billion under management. The NexCore-Heitman joint venture portfolio is estimated at roughly $136 million.
NexCore officials say the new company is poised to take advantage of an increase in demand for healthcare facilities over the next several years as healthcare reforms take effect. With the bond and capital market still mired in difficult times, healthcare providers are looking to developers with third-party capital for both small and large projects.
According to Venn, the newly formed public company, managed by himself, Chief Investment Officer Peter Kloepfer and Chief Operating Officer Bob Gross, offers greater flexibility and financing for NexCore’s clients and projects. Its business plan will focus entirely on NexCore’s six-year business plan to build a platform to develop, acquire, own and manage healthcare real estate around the country, and won’t affect any of the company’s existing portfolio.
“Nothing is changing in NexCore’s development or management of projects or with control of the company.” He said. “As far as our clients and partners are concerned, we are the same flexible, responsive company they know.”
Formed in 2004, The NexCore Group has offices in Chicago and Bethesda, Md., as well as Denver and has a portfolio of nearly 5 million square feet of facilities, with 1.8 million square feet currently owned and managed.