Sila Pays $60M For Burr Ridge Medical Office Building

Sila Realty Trust has bought a medical office building in Burr Ridge, underscoring the growing investor interest in office properties with single long-term tenants.

The Florida-based firm paid nearly $60 million for the three-story, 104,900-square-foot building at 6800 Frontage Road, CoStar reported. The property in Chicago’s southwest suburbs is fully leased to Loyola University Medical Center.

The seller was Healthcare Realty Trust, a Nashville-based REIT that acquired the building last year through its merger with Arizona-based Healthcare Trust of America.

While the terms of Loyola’s lease are unclear, it’s the healthcare system’s largest ambulatory care facility, which was built in 2010, and the move aligns with a broader market trend in which investors seek properties that offer stable, long-term cash flow — traits frequently offered by health care tenants — in the face of rising interest rates and economic uncertainties.

Traditional multi-tenant office buildings continue to struggle in the face of hybrid and remote work’s persistence, especially in the Chicago suburbs where the office vacancy rate soared to a record high of nearly 30 percent in the second quarter. Medical office buildings, however, have gained traction among investors due to their in-person service requirements and the growing demand for healthcare services, driven in part by aging baby boomers.

“We are pleased with this addition to our portfolio as, we believe, it demonstrates the company’s ability to source accretive acquisitions in the current market environment and supports our goal to maximize stockholder value by adding properties with strong creditworthy tenancy,” Sila CEO Michael Seton told Crain’s.

This investment stands out amid a broader decline in traditional office building sales. Nationwide, there were $31.6 billion of such sales through the first eight months of 2023, down 64 percent year-over-year, Crain’s reported, citing data from MSCI Real Assets.

The Burr Ridge building, valued at $72.5 million in 2017, has likely depreciated due to Loyola’s shorter remaining lease term.

— Quinn Donoghue