New Medical Park Counts on Locale

Benton County’s first large-scale medical office park is headed for the delivery room. A group of high-profile investors plans to be the proud papas of Creekside Medical Park with construction beginning in late 2005.

Carved out of the 115-acre planned Creekside Place development along New Hope Road in Rogers, the 58-acre project will be a mixed-use professional office enclave with the potential for about 600,000 SF of office/retail space.

Mitchell Massey of Strategic Development Partners LLC has teamed up with Creekside Place’s original developers — Tom Terminella, Greg Nabholz, Tom Morter and Terry Johnson — for the venture they say will create Benton County’s premier medical park. Their plan is injected with one of the business world’s best known miracle drugs: location.

The medical park’s next-door neighbors, 200-bed St. Mary’s Hospital and the 800,000-SF Pinnacle Promenade retail center, will act as complementary-use facilities or the equivalent of a built-in anchor tenant, the developers said.

“[The site] is going to be as important as any other area within these two counties,” Terminella said. “You don’t have a potentially big beautiful mall and a $150 million to $200 million hospital that anchors your site [anywhere else in the area].”

Multiply the park’s potential space by the $200 per SF estimated building and land cost there, and the build-out value climbs to a healthy $120 million.

“I think there is a large need for medical office space in Benton County,” Massey said. “I think it is time that someone created something that is going to be the predominant medical office community in Benton County.

“With its location near the hospital and the mall, it makes so much sense.”

The overall Creekside Place development is split by New Hope Road with a 25-acre tract on the north side and 90 acres on the south where the medical park will be contained. Creekside Place’s original developers acquired the 115 acres in early 2004 through their shell, Creekside Development LLC, for more than $100,000 per acre or a total cost of more than $11.5 million.

The rest of Creekside Place already has some commitments from the financial industry. Simmons First Bank of Northwest Arkansas, whose parent institution Simmons First National Bank of Pine Bluff is financing the medical park deal, will build on the north side of the road along with Pinnacle Bank.

The remaining 30 or so acres outside the medical park will include a fueling center, a hotel and restaurants, Terminella said.

Massey and Terminella are well-known developers in Fayetteville. Nabholz is a long-time construction guru in Conway. The Rogers partners, Morter and Johnson, are principals at Morter Chiropractics and VeriSource Inc., respectively.

Terminella said the reason for teaming up with Massey is simple: He’s down with OPE.

“It’s just energy,” he said. “Other people’s energy, and in this marketplace you just have to have plenty of OPE.”

Steve Lane and Ramsey Ball of Lane Real Estate Services Inc. in Bentonville are heading up the leasing and sales effort.

Infrastructure

Eleven months from now, the internal infrastructure, which includes Bellview Road and Hospital Boulevard, should be complete.

“The issue of Hospital Boulevard, New Hope Road and Bellview has all come full circle with an equitable situation for all and the right-of-ways are established,” Terminella said. The contractor for the new St. Mary’s should begin on Hospital Boulevard by the end of January, and Bellview, which is Creekside’s charge, will follow shortly after, Terminella said.

Those roads, in addition to New Hope, will all eventually be five lanes.

Ari Silverberg is senior development director for Chicago-based General Growth Properties Inc., a publicly traded real estate investment trust that owns, develops, operates or manages shopping centers in 44 states. Along with The Pinnacle Group in Rogers, GGP is developing the Pinnacle Promenade.

Silverberg said GGP and its partners are excited about its future neighbors.

“We are thrilled to have a first-class hospital as a neighbor as well as a medical office park,” Silverberg said. “… And on the other side of I-540, the Embassy Suites, the Marriot Convention Center planned by John Q. Hammons and the existing office and retail that has already made this part of Rogers a hub of activity.

“We’ve seen this as very popular in terms of the combination of office in a retail setting. From a retail standpoint, it’s built-in traffic.”

Northwest Excavation, a division of Nabholz, is the site contractor for the medical park. The design and engineering was done by Crafton Tull & Associates in Rogers.

Plans call for a lake in the center of the park and walking trails.

Ball said medical office space rents for $18 to $22 per SF annually versus the normal triple-net rental rate of about $14 to $15 per SF annually.

Doctor Demand

The Creekside group has identified about 1,000 potential tenants in the medical field across Washington, Benton, Carroll and Madison counties.

“We studied the medical office community,” Ball said. “We talked to physicians and we talked to people who provide services for physicians, clinic administrators and surgery centers. There is a very nice mix of medical and non-medical related uses we can put in there.”

Mercy Health System of Northwest Arkansas Inc. has about 80 physicians on staff and has plans to add another 40 within the next two years. Of that 80, at least 22 were added in 2004 alone. Washington Regional Medical Center has 300 physicians on staff, and Northwest Health System Inc. has about 320. Doctors can be listed on staff with several different health care providers, making it difficult to estimate the exact number of practicing physicians in the area.

John Lawrence, the developer of the 23-acre Beau Chene Crossing office park off 28th Street in Bentonville, said earlier this year that for every square foot of hospital space built, there’s a need for one to two times that amount in support square footage.

Based on information from city planners, more than 840,000 SF of medical office and hospital space is planned or under construction in the two-county area.

That figure includes the 19,000-SF expansion of Northwest Medical Center of Benton County, the 350,000-SF St. Mary’s project and another 150,000-SF medical office building planned for that site.

Tenant Trials

Creekside has a potential of 350,000 to 400,000 SF of office/medical space, plus an additional 250,000 SF of retail space on the out lots.

About 13 of the 40 total lots have frontage on Hospital Boulevard, New Hope Road and Bellview Road. Ball expects about 27 lots to be medical/office, office and retail.

“Finishes in a medical office environment are typically more costly than you would see in a standard office and that’s primarily from plumbing, clean air/environmental issues, X-rays have to be shielded and typically the quality of finishes are a little bit nicer, especially in the public areas,” Ball said.

“You might buy your own parcel where your building is, but your parking and all amenities will be provided by the developer,” Lane said.

Some of the amenities Creekside plans to offer are parking and landscaping.

Commercial lots range from one acre to 2.25-acres, Massey said.

“The important thing is that we are flexible to accommodate the tenant,” Lane said. Lots can be combined or split, he said.

Lot prices and lease rates have not been determined yet.

Lane and Ball said they are planning on a total build-out schedule of five years.

“A large part of North Hills [medical park] was pre-sold and it was completely sold in 18 months and built-out soon thereafter,” Ball said.