MedCraft Launches $500M Medical Office Acquisition Platform

MedCraft Healthcare Real Estate and Cadence Healthcare Group, a wholly-owned subsidiary of Cadence Capital Partners, have formed MedCraft Investment Partners (MIP), a $500 million acquisition platform that will be active over the next 18 to 24 months. The platform is capitalized through an institutional partner. 

MIP is led by MedCraft Principals Jon Lewin, Eric Carmichael and Keith Beneke and long-time healthcare real estate capital markets experts Michael Bennett and Jay Soave of Cadence.

MIP will offer co-investment opportunities in its acquired real estate and expansion of client ambulatory networks within its growing portfolio. MIP will also pursue complementary MOB assets and development from new third parties.

MedCraft’s first investment fund has acquired Kenwood One TriHealth Orthopedic & Sports Institute in Cincinnati and TCO Otsego Twin Cities Orthopedics in Otsego, Minn.

MIP has over $200 million in on- and off-market opportunities currently in the underwriting or LOI stage. With the MIP fund well on its way to achieving its investment objectives, the leadership team already has plans underway for a second, larger fund that targets more than $1 billion of MOB investments.

The two-story, off-campus building Kenwood One TriHealth Orthopedic & Sports Institute, built in 2008, is 100% leased to an investment-grade healthcare tenant, Cincinnati-based TriHealth. The 11,394-square-foot Otsego Twin Cities Orthopedics property, built in 2010, is a one-story office building 100 percent leased by TCO, a large independent orthopedic practice.

As many sectors have struggled through the pandemic, investors have shown interest in medical offices. “The uncertainty caused by the COVID-19 pandemic seen in other real estate asset classes, such as retail and hospitality, is increasing investor interest in the stability of the MOB space, which benefits from significant long-term tailwinds, such as an aging population and increased healthcare spending,” according to the H2C Industry Insights Medical Office Building Quarterly Update 2Q20 from Hammond Hanlon Camp LLC. 

Separately, a report from Cushman & Wakefield made the case that the medical real estate sector will be resilient in the long run, fueled by the same demographic factors that existed before the novel coronavirus rolled through the US. 

“According to the Centers for Medicare and Medicaid Services, between 2020 and 2027, healthcare spending is projected to increase by $1.9 trillion in the US alone,” the report said.