The VA Signs Biggest Medical Office Lease on Record in San Diego

The Veterans Administration has signed the largest medical office lease in San Diego history. The government agency signed a 100,000-square-foot lease at 8875 Aero Drive in San Diego, California, for a new outpatient clinic, which represents an expansion for the VA. The lease has a 20-year term and is valued at $148 million.

While this is an exciting milestone for the medical office market in San Diego, the lease transaction itself was challenging and took nearly four years to complete. The VA’s specific site requirements were the first set of challenges. Taking in parking and size details into account, there were only three sites that fit the VA’s needs when it put out its original request for space. “They put the requirement out and reach out to owners in the area that fit the general criteria,” Brandon Keith, SVP at Voit Real Estate Services, tells GlobeSt.com. “The first time the requirement came out to the public was in May 2015. Officials from the VA toured the property in the summer of 2015, and from that time frame to summer 2017, nailed down terms of the deal, and then went through congressional process.” In total, the process took until February 2019 to close.

The long time frame eliminated other candidates, but well positioned Keith’s client to win the deal. “They had three parties that raised their hands and said they could meet the requirements, and we were one of those properties,” says Keith. “Because the process takes so long, by the time they were ready to negotiate and take formal submittals, the other two properties were no longer available.” The final property became the only option because it was preoccupied with a foreclosure process. “When they first looked at the property, we were in receivership, and the property went from receivership to foreclosure,” adds Keith. It was essentially a troubled asset, and it was very difficult to make any type of deal happen. As a result, by the time the VA was ready to negotiate, we just happened to be the last man standing.”