Three former colleagues at a medical office developer have launched a new Chicago-based firm to tap into growing healthcare demand while navigating challenges in real estate and the broader economy.

Daniel Ahlering, Jack Sullivan and Jay Heald recently formed Capital Healthcare Properties, a company that plans to buy and develop properties for doctor’s offices and other medical uses in the Chicago area as well as in Arizona and Ohio, they told CoStar News.

The firm will be based within the River North office of a well-known Chicago development firm, Hubbard Street Group. Ahlering is based in Columbus, Ohio.

As part of a joint venture with Capital Healthcare Properties, Hubbard Street managing partners John McLinden and Kage Brown have formed an affiliate called HSG Medical.

The independently operated HSG affiliate will invest in Capital Healthcare deals while also providing investment oversight, accounting, administrative services and office space, the firms said.

The new partnership comes amid the lingering effects of rising interest rates, recent bank failures and worries of a recession, which have made buying and developing real estate far more difficult in recent months.

“It’s certainly not the easiest time to be starting this,” Heald told CoStar News. “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.”

Heald, Sullivan and Ahlering worked together at Chicago-based medical office developer MedProperties Group before leaving the firm earlier this year. Before that, they worked together at brokerage JLL, with Sullivan and Ahlering in capital markets and Heald in office tenant representation.

Projects the three have been involved in include a 180,000-square-foot development for Northwestern Medicine within the Oak Brook Commons mixed-use project in Oak Brook, Illinois; a 71,000-square-foot Northwest Community Hospital project in Buffalo Grove, Illinois, and a 60,000-square-foot project in Gilbert, Arizona, anchored by The CORE Institute.

In his decades with Centrum Partners and at Hubbard Street, which he formed in 2016, McLinden has been involved in high-profile projects such as converting the former Montgomery Ward headquarters tower along the Chicago River and part of a former Marshall Field’s warehouse complex on the city’s Northwest Side into apartments.

Hubbard Street also has developed a facility for DuPage Medical Group — now known as Duly Health and Care — within a former Kmart property in Oak Lawn, Illinois. Previously, the HSG Medical principals, while working together at Centrum, were involved in developing a Northwestern Medical facility as part of a project in Vernon Hills, Illinois.

“We’ve always been interested in increasing our med office exposure, but to grow you really need a dedicated team,” Brown said. “Forming a venture with Capital Healthcare was the perfect scenario.

“They’re in the middle of their careers and hungry. It works with our team that’s lean and can move quickly on deals.”

The venture will focus on deals of 15,000 square feet to 100,000 square feet, starting with a few projects per year, according to the principals.

“We believe that the healthcare industry really represents a huge growth opportunity,” Brown said. “As our population ages, there’s a push to move medical care out of hospitals.”

The HSG principals bring relationships with banks and well-known investors in past projects such as Harrison Street, Carlyle Group and Angelo Gordon.

Access to investment dollars and debt will be crucial at a time when financing deals have become more difficult throughout the country. But the challenging economy could generate opportunities for developers to serve medical systems that need to grow even amid higher borrowing costs for real estate projects, Heald and Brown said.

HSG and Capital Healthcare will look to build and lease out facilities to medical groups, likely with options for the tenants to eventually buy the buildings, they said.

“Medical is popular right now, so the competition is tough,” Heald said. “These tenants typically have very strong credit, which amplifies the competition. That being said, there are very few pure-play medical office developers in this market and in the country. We’ll be focused on client service and satisfaction.”

This story was updated April 26 to clarify HSG Medical principals’ development history.