Chandler Medical Pavilion_Property for Sale

1125 S Alma School Rd, Chandler, AZ, 85286, US

Chandler Medical Pavilion

Asset Description

Jones Lang LaSalle Americas, Inc. (“JLL”) has been exclusively retained to present qualified investors with the opportunity to acquire the fee simple interest in a recently-constructed, purpose-built Class A outpatient medical building (“Chandler Medical Pavilion” or the “Property”) with 65,931 rentable square feet strategically located proximate to the 124-bed Banner Ocotillo Medical Center campus in Chandler, Arizona. The Property is 100% leased to Banner Health (“Banner”), the largest integrated health system in Phoenix and Arizona, with an investment grade rating of AA- from both Standard & Poor’s and Fitch Rating Services. Banner is the sole tenant and executed a 10-year triple net lease in 2021 with over $1.6 million in year one net operating income based on net rents of $24.87 per square foot, and net rents escalating at three percent (3%) annually. The lease offers five, five-year renewal options with a renewal rent reset to fair market value, presenting a significant mark to market opportunity with in-place rent approximately 30 percent below market.

The Property is a high-upfit, highly specialized outpatient center with over $35 million of capital invested into the tenant suite improvements (inclusive of FF&E). High-margin specialty services at the Property include an ambulatory surgery center with three operating rooms, an advanced imaging center, an accredited cardiology department, and a Banner Health Clinic offering gastroenterology, endocrinology, and orthopedics.

Chandler Medical Pavilion was a 2021 build-to-suit for Banner Health as a mission-critical multispecialty outpatient center to compliment the recently constructed Banner Ocotillo Medical Center. Chandler is one of the fastest growing areas in the Phoenix metro, experiencing annual population growth of 2.7 percent on average over the past 13 years, with over 122% population growth since 2000.

The opportunity offers an investor a desirable long-term cash flow stream from a prestigious and highly ranked market-leading health system in Phoenix with $1,639,735 in year one net operating income on triple net leases inclusive of 3.0 percent annual rent escalations. The Property will be conveyed fee simple and free of any mortgage encumbrances.

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Attributes

Building area gross

6,125 m²

Occupancy

100%

Year built

2021

WAULT

7 years

Media

Investment Highlights

Rare trophy campus-adjacent medical outpatient building investment

• State-of-the-art 65,931 rentable square foot, Class A outpatient medical center with an ambulatory surgery center, advanced imaging and high margin specialties

• 100% leased to Banner Health (S&P: AA-) until July 2031 with 3.0 percent annual rent increases

• New construction, build-to-suit for Banner in 2021

• Ability to acquire significantly below replacement cost

• Five, 5-year fair market value renewal options and substantial mark to-market rent opportunity with in-place rents at $24.84/net (effective

7/1/24), approximately 30% below market

• Nearly $35 million of capital invested by Banner into the buildouts of their suites (inclusive of FF&E)

Desirable Banner tenancy

• High investment grade rating at AA- (S&P and Fitch), operating in six states with 2023 revenue of $13.7 billion and 28 hospitals

• Adjacent to Banner Ocotillo Medical Center, of one of Banner’s most recently built hospitals, already generating $88 million in net patient

revenue and a strong operating cash flow margin

• Banner Ocotillo Medical Center is a four-story, newly built, comprehensive medical center which is part of an expanding medical community

• Largest integrated health system in Arizona

• Banner is the largest employer in Arizona as well as a dominant employer in Maricopa County

• Banner leases approximately 8,400 rentable square feet of shell space that they have earmarked for organic expansion and has no interest in subleasing. Banner is responsible for all costs associated with any future expansion

Mission critical outpatient center with high margin healthcare services

• Banner Surgery Center – Chandler offers three operating rooms, six pre-operating rooms and ten post-anesthesia care units and

offers general, gastrointestinal, orthopedic, podiatry, urology, plastic and hand specialties

• Banner Imaging Chandler offering comprehensive radiology and imaging services such as nuclear medicine, MRI, X-ray, and CT scan

• On the second floor, Banner Health Clinic operates out of 19 exam rooms offering gastroenterology, endocrinology, and orthopedic specialties

• Banner utilizes the entire third floor for outpatient cardiology and operates out of 22 exam rooms providing nuclear stress testing, echocardiography, vascular ultrasound, electrophysiology, and interventional cardiology

Strategic location in a rapidly growing market

• Strategically located less than one half mile from the recently opened 124-bed Banner Ocotillo Medical Center and less than one mile from the 429-bed Chandler Regional Medical Center

• The Chandler submarket has experienced robust population growth of 2.7% since 2021 within a one-mile radius the Property

• Medical office rents in Phoenix surged 12.7 percent over the past three years

• High average household income of $113,500

• Excellent access to the Loop 202 Freeway (182,000 VPD) and South Alma School Rd (36,000 VPD)

• High daily visitor counts averaging 119,800 visits per year per Placer.ai data