NexCore Completes Two Illinois MOBs

In early 2004, Alexian Brothers Health System faced a complex challenge. The suburban Chicago provider had initiated a more than $400 million program to expand its facilities. Now it needed to incorporate convenient new medical office space to house those enhanced services. Yet it also had to minimize its costs. Finally, perhaps just as importantly, the new space needed to be attractive for physician recruitment and retention.

NexCore Group had the answer. The Denver-based firm’s experienced healthcare real estate team worked closely with Alexian to craft customized solutions resulting in two new on-campus medical office buildings (MOBs). The recent openings of those facilities satisfied the system’s need for the kind of on-campus medical office space favored by patients and physicians while preserving Alexian’s capital resources for its acute care needs.

In Hoffman Estates, Ill., tenants have begun moving into St. Alexius Medical Center MOB III, a new five-story, 114,000 square foot MOB that is connected to the hospital and a two-level 380-space parking deck. In Elk Grove Village, Ill., NexCore recently completed Alexian Brothers Medical Center MOB, a three-story 65,000 square foot on-campus MOB that tops a four-level, 570-space parking structure. In addition to providing easy access to parking, both facilities are integrated with the existing hospitals and diagnostic services to maximize patient, physician and staff convenience.

NexCore was selected for these projects because of the firm’s extensive experience in MOB development and financing. The firm structured the financing for the projects to enable Alexian to achieve a strategic objective of getting the on-campus space it needed while maintaining a healthy balance sheet so that it could invest in its core business.

“We want to invest our capital in technology and patient care space,” explains Penny Davis, Alexian vice president. “So it made sense to partner with NexCore to build the medical office space, which is not our core business.” As for the physicians, they not only have exciting new space in which to practice, they also have an opportunity to invest in the real estate.

“Physicians develop a sense of ownership for the buildings in which they practice,” NexCore Senior Managing Director Peter Kloepfer explains, “and that mindset strengthens the hospital-physician relationship. For these projects, we went one better by creating a financing structure that actually enables the physicians to own equity interests in the properties. Participating physicians are not just tenants or even owners of individual office condominiums, they own shares of the entire buildings.”

Rosenbloom & Saxon Surgical Specialists had an expiring lease in an off-campus building, but initially had no interest in the new St. Alexius MOB, says Dr. Bob Rosenbloom, a partner in the practice. However, he says he was soon attracted by the new facility’s quality and location and, after talking with NexCore, also became interested in investing. “They put it in terms that physicians – who aren’t financial people – can totally understand,” Dr. Rosenbloom says. “Now my partner and I are both taking the physician investment option. It’s good for the building, it’s good for the hospital and it’s good for us.”