Cushman & Wakefield’s Healthcare Capital Markets team is pleased to present this Ascension Providence Rochester Hospital Medical Office Building for sale or recapitalization (more below) in Rochester, Michigan. The property is in the heart of Rochester’s medical community and is situated on the campus of Ascension Providence Rochester Hospital via a ground lease (the subject property is a leasehold interest). This multi-tenant medical office building spans 113,687 of rentable square feet and is internally connected directly to the 290-bed Ascension Providence Rochester Hospital. 

The property is currently approximately 61% occupied with a weighted average lease term of over three and a half years remaining. The in-place vacancy of 39% provides an investor with an opportunity to add value via a realistic and conservative lease-up strategy. Ultimately, the current vacancy can be attributed to a few recent changes in leadership in the hospital, all too familiar headwinds faced by many healthcare providers following the COVID pandemic.  Anchoring tenants to the facility include Ascension Providence Rochester Hospital, Ascension Family Practice, Contemporary Obstetrics and Gynecology, P.C., and more. Most of the tenants operate under triple net leases with strong annual rental escalations. The tenants are responsible for all real estate taxes, operating expenses, and insurance, except for repairs required by the landlord. Ascension Health and affiliates occupy over half of the rentable area and contribute over 80% to the gross rental revenue. 

The property is subject to a ground lease with approximately 70 years of the term remaining (as of 10/1/2024) inclusive of two, 15-year renewal options, which is ample time for investors to fully capitalize on the property, while still leaving a reasonable term remaining on the lease for future investment. The annual ground rent is currently $39,930, which increases by 10% every five years. The next increase is $43,923 annually which is scheduled for 2/1/2025. 

Formerly known as Crittenton Hospital, the hospital was renamed Ascension Providence Rochester Hospital following a merger between Ascension and Crittenton Hospital in 2015. Ascension Providence Rochester Hospital is a full-service hospital with 24/7 emergency care and many surgical specialists. The hospital includes a level III trauma center. From heart, stroke and lung care to sleep disorders and comprehensive orthopedic services, their doctors and care teams deliver personalized care for serious and life-threatening injuries and illnesses. A wide range of outpatient services are available including minimally invasive procedures, diagnostic imaging, lab tests, respiratory therapy, and physical medicine and rehabilitation therapy services all on one campus. Ascension Providence Rochester Hospital has primary and specialty care doctors. Ascension Providence Rochester Hospital is a fully-accredited teaching facility and offers residency programs in affiliation with Wayne State University’s School of Medicine. Areas of focus include Internal Medicine, Family Medicine, and Ear, Nose and Throat (ENT) Care. Ascension Providence Rochester is a teaching campus for nurses from Oakland University’s School of Nursing. Ascension is one of the largest private healthcare systems in the United States and has earned credit ratings of Aa2, Stable (Moody’s), and AA+, Stable (Fitch).

Additionally, the recent joint venture between Ascension Michigan and Henry Ford Health further enhances the strategic value of this property. Henry Ford Health, a leading healthcare provider in Michigan, operates several hospitals in the market, including Henry Ford Hospital in Detroit, Henry Ford West Bloomfield Hospital, Henry Ford Macomb Hospital, and Henry Ford Wyandotte Hospital. This joint venture is set to expand Henry Ford Health’s footprint and service capabilities in the region, bringing additional resources and expertise to the Rochester campus. This integration will likely foster increased collaboration and referral opportunities between the newly affiliated facilities and existing Henry Ford hospitals, benefiting both tenants and patients.