Award of Merit
Best Real Estate Transaction Sale or Recapitalization Over $25 Million

Executive Summary

Acquiring a suitable healthcare facility in a highly competitive market is a difficult task, but CDC Realty, LLC, a group of Capital Digestive Care physicians and other investors represented by our team, closed on 100,000 square feet of medical office space in a sought-after, high-profile medical corridor near Washington, DC.

Located in Montgomery County’s Life Sciences Corridor, the new medical facility includes two properties at 15001 and 15005 Shady Grove Rd., Rockville, Maryland. The two-building acquisition valued $32.75 million and totaled 100,000 square feet with a 35,000 square-foot master lease. Capital Digestive Care, headquartered in Silver Spring, Maryland, is the largest independent gastroenterology group in the Mid-Atlantic and Northeastern states and the fifth or sixth largest in the country. Established in 2009, it now boasts 17 office locations and more than 65 doctors and advanced care practitioners.

Capital Digestive Care sought an opportunity to integrate several separate medical offices, allowing providers to reduce overhead while improving the patient experience and delivery of care. Four years prior to the acquisition, they prepared a strategic plan to consolidate four office buildings into one, large medical complex. The group faced challenges due to the difficulty of acquiring institutional-quality buildings in Washington, DC.

Our team’s market knowledge and unwavering focus helped Capital Digestive Care, a longtime client, overcome its real estate obstacles. In 2014, our team began researching off-market buildings and adjusted the Capital Digestive Care leases to expire in a coordinated timeline, allowing the staff and services to efficiently move into a newly acquired facility. However, some leases expired later and had to be restructured into the acquired property. Location was an important factor for the new medical complex due to staff and patient demands. A centralized metro hub location with easy access, convenient parking and nearby amenities was essential. Furthermore, the new space needed enough square footage to consolidate three existing clinical offices on one floor.

In 2017, Capital Digestive Care and our team zeroed in on a 100,000 square foot, two-building medical office complex at 15001 and 15005 Shady Grove Rd. in Rockville, Maryland, about 19 miles north of Washington, D.C. The medical complex is in a prime location in Montgomery County’s Life Sciences Corridor near major healthcare facilities, including Shady Grove Adventist Hospital, the National Cancer Institute and Kaiser Permanente. The buildings also house a strong tenant base, including a Johns Hopkins Medicine physicians group, an MRI center, an OB-GYN office, an eye clinic and about 35,000 square feet occupied by Capital Digestive Care.

However, the building presented initial challenges. The landlord at 15001 and 15005 Shady Grove Rd. was hesitant to relinquish ownership of the property. Rather, he wanted to re-tenant the buildings and hold long-term. Furthermore, existing tenants faced multiple lease expirations, which complicated the acquisition process.

Our team negotiated with persistence and engaged a developer Request for Proposal process to identify an investor partner and form a joint venture. This process ultimately selected Anchor Health Properties as an appropriate partner for Capital Digestive Care due to the company’s specialization in real estate.

The property contract was signed August 2017. Afterwards, Capital Digestive Care added a third joint venture partner/co-owner – MedProperties Holdings LLC, a nationwide real estate private equity firm headquartered in Dallas, Texas. Equity for the acquisition was also provided by more than 40 of the group’s physicians and senior management members. This transaction marks Capital Digestive Care’s first acquisition.

The Capital Digestive Care physicians and three joint venture partners closed on the medical complex in May 2018 with plans to consolidate current services and execute occupancy within the next 12 to 24 months. The group is working with an architect and Anchor Health to remodel both buildings’ common areas and parking as well as develop space for additional services, including an infusion center and diet and nutritional services.

In addition to this challenging, four-year-long transaction, our team regularly manages a wide variety of healthcare real estate projects that help Capital Digestive Care reduce costs and operate with greater efficiency. Activities include a project in 2013 to renegotiate the lease on a pathology facility in Bowie, Maryland and a 2014 project to restructure two ambulatory endoscopy center spaces. Both resulted in significant savings.

The Shady Grove Road building acquisition was an important strategic objective for Capital Digestive Care. The facility serves as a patient hub housing a large clinical office as well as the organization’s procedural centers and many ancillary services. The acquisition favorably positions providers of medical services in a high-traffic corridor with a large medical presence, which allows Capital Digestive Care to enhance and expand its services while benefitting from measurable cost savings.