Davis Adds Minneapolis-Area MOB to Growing Portfolio

Woodlake Medical Building

Davis Healthcare Real Estate has acquired Woodlake Medical Building, a 42,467-square-foot property in Woodbury, Minn., through its Davis Medical Investors LLC fund. The company paid $18 million for Class A asset, with Bridgewater Bank providing the acquisition financing. According to CommercialEdge data, the previous owner was MFC Properties.

The two-story medical building came online in 2003 on a 4.7-acre site. The property features an outpatient surgery center and has a parking ratio of 4.5 spaces per 1,000 square feet, CommercialEdge data shows.

Woodlake Medical Building was completely leased at the time of closing. All three tenants—Woodlake Surgery Center, St. Paul Eye Clinic and Midwest ENT—have signed a lease extension for 15 more years, in conjunction with the acquisition.

Located at 2080 Woodwinds Drive, in the Eagle-Woodwinds neighborhood, the asset is 17 miles from downtown Minneapolis and has access to Interstate 494. M Health Fairview Woodwinds Hospital is 1 mile south of the building. Other medical facilities in the area include Minnesota Urology, Health East Cancer Care, Reynolds Audiology and Creekview Dental, among others.

Health-care real estate, still a good investment

The transaction marks the 13th acquisition for the Davis Medical Investors LLC. Established two years ago, the fund currently owns 567,356 square feet in assets across Minnesota, Tennessee, Connecticut, Maine and Ohio, investments totaling roughly $230 million.

Stewart Davis, executive vice president at Davis, mentioned in prepared remarks that, this year, the company acquired four medical office buildings so far, adding to a portfolio in which the properties are 96 percent leased.

A JLL report shows that medical office buildings are still a key alternative asset class, even if facing certain challenges influenced by economic woes. Regardless, this sector’s fundamentals were less disrupted by the pandemic; in 2021 and 2022, absorption outpaced new deliveries and drove occupancy above 90 percent on a national level. Sales reached $9.2 billion in the first half of 2022 and JLL estimates 2022 to close at another record year.