Capital Rivers Commercial
Build-to-Suit & Shell Delivery
WelbeHealth & Fresenius Dialysis Clinic Case Study
Complex Healthcare Facility Development
Transaction Overview: Capital Rivers Commercial, in partnership with Mid-West Group of Companies, successfully developed two healthcare facilities: a WelbeHealth center and a Fresenius Dialysis Clinic. The project required a dual-approach development, with WelbeHealth being a full turn-key build-to-suit (BTS) and Fresenius delivered as a shell condition with all site work completed. The development was executed amid a challenging economic climate characterized by rising interest rates, CAP rates, and construction costs, as well as tightening capital markets limiting construction debt options.
Executing a complex build-to-suit and shell delivery project while navigating an increasingly volatile economic environment presented significant hurdles:
- Entitlement & Permit Challenges – Securing the necessary approvals in a fluctuating economic landscape required extensive coordination with local jurisdictions.
- Rising Construction & Capital Costs – Inflationary pressures led to increased material and labor expenses, while interest rate hikes impacted overall project feasibility.
- Tighter Capital Markets – Fewer financing options meant securing construction debt required creative structuring and lease renegotiations.
- Coordinated Delivery of Two Different Product Types – While WelbeHealth required a fully completed facility upon delivery, Fresenius needed a shell condition with all site infrastructure in place, requiring careful planning and execution.
To overcome these challenges, the development team implemented strategic financial and operational solutions to ensure project viability:
Lease Restructuring – Prior to closing on the land, lease terms were renegotiated with tenants to offset increased project costs through:
- Tenant Contributions to share in capital costs and keep rents manageable.
- Increased Base Rent to align with rising construction and capital expenses.
- Value Engineering to optimize design and reduce overall project costs.
Strategic Partnerships & Cost Controls – A highly experienced project team, including Tilton Pacific Construction, was engaged to drive efficiency:
- Structured the contract as cost-plus with a savings provision to incentivize cost savings.
- Leveraged long-standing relationships with the architect, civil engineer, and general contractor to reduce both hard costs and project timeline.
- Worked with an exceptional superintendent to keep the project on track and ensure shared goals for cost control and speed.
Despite economic headwinds, the project was successfully delivered on time and met all tenant requirements:
- WelbeHealth was completed as a full turn-key BTS, ensuring operational readiness from day one.
- Fresenius received its shell condition with all site work completed, allowing for a seamless tenant build-out.
- Lease restructuring and cost optimization measures ensured financial feasibility despite rising costs.
- Strategic team coordination enabled timely project execution, mitigating the impact of rising interest rates and construction inflation.
By combining proactive lease negotiations, value engineering, and strong project partnerships, Capital Rivers Commercial and Mid-West Group of Companies successfully delivered a complex dual-tenant healthcare development in a challenging economic environment.
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