Overview
Matthews™ Healthcare Division is pleased to offer the opportunity to acquire a 8,057 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 pain management and bariatric medicine, among other services.
The property is situated on a 0.37-acre site at 205 E Laurel Blvd, Pottsville, PA. The property is strategically positioned to serve the greater regional market, situated just south of the Wilkes-Barre-Hazleton MSA. This neighboring metro area encompasses a population of over 567,000 people, with a high-density senior demographic where roughly 21% of residents are aged 65 years or older, driving significant regional demand for the specialized medical services provided at this location.
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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