Overview
Matthews™ Healthcare Division is pleased to offer the opportunity to acquire a 8,700 square foot single-tenant outpatient medical property leased to Lehigh Valley Physician Group. The lease is backed by a full corporate guarantee from Lehigh Valley Health Network, Inc., a premier health system with over 125 years of operating history. On August 1st, 2024, Lehigh Valley Health Network completed its merger with Jefferson Health, forming a major regional academic health system serving Pennsylvania and New Jersey, creating a system with 32 hospitals, over 700 care sites, and approximately 62,000 employees. Lehigh Valley Health Network now operates as part of the larger Jefferson Health system, whose credit ratings are “A” from S&P Global.
The property is occupied under an absolute net lease that provides for 2.5% annual rental escalators. Under the lease terms, the tenant is responsible for paying all operating costs directly, including taxes, utilities, and insurance. While the landlord may fund certain capital expenditures, the tenant is required to reimburse these costs via amortized “Capital Replacement Payments” as additional rent for the duration of the term. The facility serves as an outpatient facility offering preventive care as well as comprehensive diagnostic testing and specialized treatment plans. Internists at the property treat a wide range of conditions, including arthritis, asthma, geriatric care, diabetes, heart disease, and high blood pressure, while also providing immunizations and preventive health maintenance exams.
The property is situated on a 0.37-acre site at 10 E Spruce St, Frackville, PA 17931. It is located in Schuylkill County, which comprises the Pottsville Micropolitan Statistical Area. Schuylkill County has a population of approximately 144,000 residents, with roughly 21% of the population aged 65 years or older, supporting long term demand for healthcare services in the region.
Investment Highlights
- Premier Health System Operator: On August 1st, 2024, Lehigh Valley Health Network completed its merger with Jefferson Health, forming a major regional academic health system serving Pennsylvania and New Jersey, creating a system with 32 hospitals, over 700 care sites, and approximately 62,000 employees.
- Investment Grade Credit Backed Lease: The lease is backed by a full corporate guarantee from Lehigh Valley Health Network, Inc., a Pennsylvania non-profit corporation. Lehigh Valley Health Network is part of Jefferson Health (S&P: A).
- Absolute Net Lease Structure: The agreement is an absolute net lease where the Tenant is responsible for all operating expenses and is responsible for reimbursing capital expenditures on an amortized basis.
- Long-Term Lease: The property features a fifteen (15) year initial term with over 14 years remaining, providing long-term stability and cash flow.
- Attractive Rent Growth: The lease includes 2.5% annual rental escalations throughout the lease term, offering investors consistent rent growth and a great hedge against inflation.
- Direct Expense Management: The Tenant manages and pays for all operating expenses directly, including real estate taxes, insurance, and utilities.
- Capital Expenditure Reimbursement: While Landlord funds or reimburses Capital Replacements, the Tenant is required to pay back the amortized cost at SOFR plus 250 basis points as Additional Rent.
- Favorable Depreciation: This opportunity offers investors the ability to capture more favorable depreciation and tax savings advantages through a cost segregation study. *Investors to confirm with their own CPA.
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