McLinden, Brown back medical office development venture

Longtime Chicago developer John McLinden is jumping into medical office, backing a startup focused on the asset class that’s been replacing retail tenants as they disappear from brick and mortar storefronts.

McLinden and Kage Brown, partners behind locally based developer Hubbard Street Group, have formed a new venture called HSG Medical to invest in Capital Healthcare Properties as demand for doctors offices and clinics rises in Chicagoland, CoStar News reported.

Daniel Ahlering, Jack Sullivan and Jay Heald recently founded Capital Healthcare with plans to buy and develop properties for various medical uses in the Chicago area as well as in Arizona and Ohio. It will be based in Hubbard Street Group’s River North offices.

HSG will invest in Capital Healthcare deals, while providing guidance and assistance with administrative and accounting tasks.

The venture was launched even as rising interest rates, a tight lending environment and fears of a recession have slowed commercial real estate growth across the city.

“It’s certainly not the easiest time to be starting this,” Heald told the outlet. “There’s a lot of uncertainty, but that creates an opportunity to source valuable long-term opportunities, whether it’s land or value-add and conversions.”

While the retail and traditional office sectors struggle in Chicago, there has been an influx of new medical and research facilities. The metropolitan area’s medical office market expanded almost 18 percent in the last decade, adding more than 4.3 million square feet of space since 2012, outpacing the national rate of 12 percent.

Other medical office projects in the works include John Novak’s planned $70 million facility for Rush University in the West Side area, and MetLife Insurance is considering converting space in Water Tower Place for medical use.

The three Capital Healthcare founders were former colleagues with the firm MedProperties, where the trio took on in projects such as a 180,000-square-foot development for Northwestern Medicine within Oak Brook Commons, a 71,000-square-foot Northwest Community Hospital project in Buffalo Grove and a 60,000-square-foot project in Gilbert, Arizona, the outlet said.

— Quinn Donoghue