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In Q1 2019, Altera purchased two medical office buildings on the campus of HCA Houston Healthcare Northwest from a private investor at very substantial discounts to replacement cost. The buildings are unique in that they are on campus but also fee simple with no use or deed restrictions. HCA purchased Northwest Medical Center Hospital in August 2017 and subsequently invested over $40 million of new capital into the ~450 bed hospital.
The buildings were under 30% leased at the time of purchase and in dire need of capital improvements to the building system, roof, foundations, and elevators. Subsequent to acquisition, Altera has completed substantial capital improvements and is actively executing its aggressive lease up plan as part of the projected 5-year hold for this investment.
Altera acquired this on-campus medical office building in a short sale transaction from Capital One NA in Q4 2018 at a very substantial discount to replacement cost. Capital One approached us based on our deep historical relationship. The prior owner had completed substantially all required capital improvements. The asset was the last asset remaining in a dysfunctional partnership, where the partners were unwilling to fund tenant improvement and leasing commissions.
Altera is currently executing its aggressive leasing and asset management strategy. Since acquisition, Altera has increased the occupancy from 58% to almost 70% and more than doubled projected net operating income.
In Q2 2020, Altera acquired this medical office building located in the Memorial neighborhood of Houston. The building requires some deferred maintenance, but more importantly, the marketing will be repositioned. Tenancy includes Houston’s top plastic surgery practice’s surgery center and other top-notch physicians who serve this prestigious neighborhood.
The building is located next to City Centre in a high density Houston overlay district. Altera has the ability to construct a second phase/building of approximately 55,000 SF if desired; underwriting excludes the second phase from consideration.
