David Frauenshuh

David Frauenshuh

Frauenshuh Companies

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Twenty-seven years after cofounding his commercial real estate development firm in Minnesota, David Frauenshuh has quietly become the largest privately held developer of medical facilities in the United States.

His Minneapolis-based company acquires, develops, finances, and manages a growing collection of Class A medical office buildings, multiple-specialty clinics, and ambulatory care centers for large institutional customers across the country. Frauenshuh currently has more than 4 million square feet under management.

In spite of a tough economy, that square footage continues to grow. In the first quarter of 2010, Frauenshuh broke ground on three medical care facilities in Texas, California, and Washington state totaling 315,000 square feet. Before the year is out, construction will have begun on eight more projects totaling 680,000 square feet in five states, including the 300,000-square-foot Virtua Voorhees Ambulatory Care Center in New Jersey.

This 20 percent growth in properties under management will follow the September 2009 opening of the 225,000-square-foot Virtua Health and Wellness Center in New Jersey; and the May 2010 unveiling of the 90-bed Bellevue Medical Center Hospital in Omaha, along with an adjacent 58,000-square-foot medical office building.

Frauenshuh saw the writing on the drywall in 1987, four years after opening his firm. As he continued to develop new commercial properties in the Twin Cities, he grew aware that the market was becoming overbuilt, profits were drying up, and the management services he was offering had been reduced to a commodity. The most appealing new opportunity was medical facility development.

“There was a hard portal of entry because of the scrutiny of the doctors and the institutions that own the hospitals,” Frauenshuh says. What’s more, the demographics of an aging population were favorable.

In 1987, Frauenshuh’s company did its first medical project, a Bloomington clinic for Park Nicollet (which remains a Frauenshuh client). These days, medical facilities, whose development costs range from $10 million to $100 million per project, account for about 90 percent of Frauenshuh’s $102 million in annual revenues. These facilities are developed and managed by a division called Frauenshuh Health Care Real Estate Solutions.

Frauenshuh also operates a commercial division, which provides real estate services to the company’s nonmedical clients, most of whom are located in Minnesota. The project costs for Frauenshuh’s commercial clients, which included Schwan’s, Bremer Banks, and Park Dental, typically range in cost from $5 million to $20 million.

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