Overview
Cushman & Wakefield Healthcare Capital Markets is pleased to offer MedStar Montgomery Medical Center I and II, two Medstar Health-anchored on-campus medical office buildings with a combined approximate rentable area of 127,868 square feet—Building I contains 70,645 square feet and Building II contains 57,223 square feet—situated on 27.2 acres at 18109 and 18111 Prince Philip Drive in Olney, Maryland. The improvements are being conveyed through a newly created 99-year ground lease at $1 per year, delivering fee-simple economics while eliminating real-estate tax exposure on the land.
The portfolio is 81.80% leased and carries a weighted average remaining lease term of just over seven years. In total, MedStar Health-affiliated tenants occupy more than 58% of the occupied space through September 2035. All MedStar-affliated leases will be extended by 10 years at close of escrow (COE). MedStar Medical Group, a wholly owned affiliate of MedStar Health and a tenant since 1986, occupies nearly half of the leased space, with the balance distributed across regional leaders in imaging, orthopedics, pediatrics, otolaryngology, rheumatology, dentistry, and rehabilitation services. Lease structures are predominantly triple-net (NNN) with 2.00 - 3.00% annual increases, allowing immediate cash flow and a clear path to convert future expirations to true triple-net formats.
Investment Highlights
Hospital-embedded location with system credit
A climate-controlled connection integrates the property with MedStar Montgomery Medical Center, ensuring embedded referrals, physician retention, and alignment with the ten-hospital MedStar Health network.
Health System-affiliated anchor and diversified specialty mix
MedStar Health-affiliated tenants occupy more than 58% of the occupied space through September 2035, while additional tenants representing 15 medical specialties diversify income and limit rollover exposure.
Affluent, densely insured trade area
Within 10 miles, median household income exceeds $137,000, the insured population tops 700,000 lives, and the senior cohort surpasses 129,000 residents, driving sustained outpatient demand.
High barriers to entry for on-campus space
Only 12% of the 4.7 million SF medical office inventory within 10 miles sits on hospital campuses, positioning the asset for durable occupancy and pricing power.
Immediate upside through lease-up and rent reset
Physical occupancy of 82% trails the submarket average of almost 89%. Stabilizing vacancy and converting full-service leases to triple-net (NNN) at market rents offers meaningful net operating
income growth.
Unique 99-year ground lease at $1 per year
The structure provides perpetual control without reversionary risk, eliminates land tax liability, and is readily financeable—an uncommon feature for on-campus assets.
Strategic Mid-Atlantic corridor
Proximity to the National Institutes of Health, the Food and Drug Administration, and the Interstate 270 bio-health cluster enhances physician recruitment and research collaboration, supporting longterm tenant retention.
Defensive capital profile
Durable construction, low common-area factors, and allocated on-campus parking limit future capital expenditures; underwriting assumes modest tenant-improvement and leasing-commission packages.
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