MedCraft, Cadence Launch $500M MOB Acquisition Fund

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MedCraft Healthcare Real Estate and Cadence Healthcare Group have launched a $500 million medical office building investment platform—MedCraft Investment Partners—to acquire medical office buildings and ambulatory assets over the next 18 to 24 months. The platform is capitalized through an unidentified institutional partner.

MIP is a 50-50 joint venture between Minneapolis-based MedCraft and Cadence Healthcare Group, a wholly owned subsidiary of Cadence Capital Partners, with offices in Denver, Chicago and Boston. MIP is led by MedCraft Principals Jon Lewin, Eric Carmichael and Keith Beneke, along with longtime healthcare real estate capital markets experts Michael Bennett and Jay Soave of Cadence.

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The MIP fund already made two acquisitions and has more than $200 million in on- and off-market opportunities in the underwriting or letter of intent stages. The leadership team is planning for a second, larger fund that will target more than $1 billion of MOB investments.

The joint venture partners say they plan to create additional economic and strategic value for healthcare provider partners by monetization of real estate assets, optimization of clinical environments, and offering co-investment opportunities in any acquired real estate and expansion of client ambulatory networks within the portfolio. MIP will also pursue complementary MOB assets and developments from new third parties.

MedCraft’s long track record as a developer will serve MIP well as an investor and asset manager, Lewin said in prepared remarks. MIP will apply the same client-focused approach to acquisitions including creating physician alignment initiatives, providing co-investment opportunities, and offering customized property and asset management services.

First Purchases

MIP’s first deal was the acquisition of the 18,536-square-foot Kenwood One TriHealth Orthopedic & Sports Institute at 8311 Montgomery Road in Cincinnati. The two-story, off-campus building was constructed in 2008 and is fully leased to an investment-grade healthcare tenant—Tri-Health, the leading integrated health system in the Cincinnati area. TriHealth-affiliated tenants include Ohio Valley Orthopedic Sports Medicine, Tri-Health Orthopedic Surgery and the TriHealth G medical group, which offers internal medicine, family medicine, gastroenterology and other medical services.

Kenwood One TriHealth Orthopedic and Sports Institute in Cincinnati. Image courtesy of MedCraft Investment Partners

The MIP fund also acquired the 11,394-square-foot Otsego Twin Cities Orthopedics property at 8540 Quaday Ave. NE in Otsego, Minn. Built in 2010, the one-story MOB is 100 percent leased and houses occupational therapy, sports medicine, hand surgery and orthopedic surgery practices. Infinite Health Collaborative, which offers durable medical equipment and medical supplies, is also a tenant.