Overview
Matthews™ Healthcare Division is pleased to present the opportunity to acquire a specialized aquatic physical therapy facility operated by Houston Physicians’ Hospital. The tenant entity represents a joint venture partnership between Memorial Hermann Health System (Fitch: AA-) and United Surgical Partners International (USPI) (51%), along with Houston Physicians’ Hospital (49%). This structure provides investors with enhanced security and confidence given the partnership’s strong credit profile and institutional backing.
The offering comprises a 100% fee simple interest in a 0.55-acre parcel located in one of Houston’s thriving northern suburbs. Houston, home to more than 7.5 million residents, ranks among the nation’s leading economic centers—boasting the third-largest concentration of Fortune 500 companies in the U.S. If considered an independent country, Houston’s economy would rank as the 24th largest in the world.
The 8,048-square-foot rehabilitation facility features a dedicated aquatic therapy pool, purpose-built to facilitate low-impact, high-efficiency recovery for orthopedic, neurologic, and post-surgical patients. This niche therapy component underscores the facility’s specialized service offering and contributes to a stable, referral-driven patient base.
Memorial Hermann Health System (Fitch: AA-) reported approximately $8.6 billion in annual revenue for the twelve months ending June 30, 2024. USPI, a subsidiary of Tenet Healthcare Corporation (NYSE: THC), operates more than 500 surgical facilities nationwide. These affiliations with financially strong, nationally recognized healthcare organizations reinforce the tenant’s credit quality and further bolster buyer confidence.
The tenant’s NNN lease is in place through 2030. Should the current tenant entity decide not to renew either lease in 2030, an affiliated HPH entity has executed a forward lease at the property effectively providing investors an additional 7 years of lease term through 2037. A rental obligation of $1,277,000 has been placed in escrow – thus providing investors additional security that they will receive a rental income stream for the property through 2037 while also creating a significant incentive for the current tenant entity to renew their lease.
The combination of institutional credit, specialized healthcare use, and built-in lease protections positions this asset as a compelling long-term investment in the Houston MSA.
Investment Highlights
- Joint Venture Partnership with Leading Health System – The facility is operated through a joint-venture partnership between Memorial Hermann Health System (Fitch AA-) & United Surgical Partners International (USPI) (51%) and Houston Physicians’ Hospital (49%).
- Credit Rated Tenant Affiliation – Memorial Hermann Health System (Fitch: AA-) reported approximately $8.6 billion in annual revenue for the 12 months ending June 30, 2024. United Surgical Partners International (USPI), is a subsidiary of Tenet Healthcare Corporation (NYSE: THC) and operates 500+ surgical facilities nationwide. This strong affiliation with well-capitalized healthcare organizations enhances tenant credit quality and should further instill buyer confidence in the asset.
- Integrated Partnership Drives Tenant Stability – The joint-venture alignment between the health system and physicians creates a steady referral network and reinforces long-term tenant stability.
- Long-Term Contingency NNN Lease In Place – The tenant’s NNN lease is in place through 2030, with a forward contingency lease extending through 2037. Should Houston Physicians’ Hospital (HPH) cease leasing or operating the aquatic center, a tenant-affiliated entity would become the tenant under the forward lease, ensuring uninterrupted occupancy. A rent reserve of approximately $1,227,000, 62% of the purchase price, has been established as additional security in the event the current lease terminates prior to 2037.
- Dominant Regional Health System Operator – Houston Physicians’ Hospital is an award-winning hospital with around 14 physical therapy locations throughout Houston.
- Specialized Rehabilitation Facility – The facility features a dedicated aquatic therapy pool, designed to support low-impact, high efficiency recovery for orthopedic, neurologic, and post-surgical patients. The presence of this niche therapy suite underscores the facility’s premium service offering and drives referral stickiness.
- Significant CapEx Improvements – According to the owner, around $45,000 was spent renovating the building. Ownership is in the process of replacing all five canopies. Completed work includes replacing damaged sections of gutters, sealing the detached HVAC exterior wall, replacing roof fasteners, and applying a rust-inhibitive primer to the roof. Mechanical system upgrades also include the replacement of a 75-gallon water heater. Together, these features significantly reduce the likelihood of future capital expenditures.
Andrew Fagundo, Tyler Swade, Michael Moreno, and Rahul Chhajed (in conjunction with Matthews Real Estate Investment Services, Inc., a cooperating foreign broker for this listing pursuant to Section 535.4(b) of the Texas Administrative Code)
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