Harrison Street Lands $126M for MOB Portfolio

Prosperity Medical Center in Fairfax, Va., is part of Harrison Street’s recently refinanced portfolio. Image courtesy of Gittleson Zuppas Medical Realty

A Harrison Street investment vehicle has refinanced a Mid-Atlantic medical facility portfolio comprising eight properties in the Greater Washington, D.C., region with $125.9 million in financing provided by Thorofare Capital.

The three-year, floating-rate mortgage loan is the largest single financing transaction ever provided by the Los Angeles-based commercial real estate debt manager, which is an affiliate of asset management platform Callodine Group LLC.

Felix Gutnikov, Thorofare’s principal & head of originations, executed the transaction along with Jacob Yi, managing director of credit, and Nicholas Krueger, associate director of originations.

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Newmark Healthcare Capital Markets Group represented the borrower. The team was led by Managing Director John Nero and Executive Managing Director Ben Appel, along with Senior Managing Directors Jay Miele and Michael Greeley.

Describing the portfolio as a distinct offering in the marketplace, Nero said in prepared remarks the experience of both borrower and lender in the medical office sector was key to the successful execution.

Gutnikov said in a prepared statement Thorofare has fostered a relationship with Harrison Street, a Chicago-based investment management firm focused on alternative real assets. He said the transaction is the culmination of prior collaborations and the firm’s trust in Thorofare to execute a multi-property, multi-state portfolio financing.

The properties are all in primary markets with strong demand for health-care services. A significant portion of the portfolio is located on or adjacent to leading hospital campuses.

One of the assets included in the financing was 2440 M St. in Washington, D.C., an eight-story, 116,400-square-foot building with 28 leases, according to CommercialEdge data. A second property was Prosperity Medical Center, a three-building, 253,293-square-foot campus at 8501 Arlington Blvd. in Fairfax, Va., with 21 leases. The asset includes 2,400 square feet of retail space.

CommercialEdge reported both properties previously had loans provided by John Hancock and originated in November 2019 that were maturing in November 2029. They are both managed by Gittleson Zuppas Medical Realty.

Previous portfolio acquisitions

Thorofare and Harrison Street only provided the names and locations of 2440 M St. and the Prosperity Medical Center, without disclosing the locations of the additional assets that were part of the financing.

However, both properties were part of several large transactions in late 2013 and early 2014, when Harrison Street acquired the entire metro Washington, D.C., medical office portfolio owned by Washington Real Estate Investment Trust. Commercial Property Executive reported at the time that the REIT sold its entire 1.5 million-square-foot medical office portfolio for an aggregate $500 million to Harrison Street Real Estate Capital LLC.

The first transaction closed in November 2013 and comprised medical office buildings totaling 877,000 square feet, two office assets with significant medical office tenancy and a parcel of land for $307.2 million. 2440 M St. was part of that transaction.

Prosperity I, II and III at 8501, 8503 and 8505 Arlington Blvd., along with two other buildings, were part of the final sale transactions that closed in January 2014 for a total of $193.6 million. The sale price for Prosperity Medical Center was $114.6 million, according to CommercialEdge data.