Medical Building Portfolio Sale Tops $95M

John Smelter of Marcus & Millichap's San Diego office, who had the listing on the property, tells GlobeSt.com that the $332 per sf sale is among the largest single-tenant transactions this year in Southern California and the largest medical office building sales in the region this year. LaSalle acquired the portfolio from Mission Viejo Medical Development Company LP, with Smelter representing both the buyer and the seller. The medical office properties occupy sites adjacent to Mission Hospital, a 338-bed acute-care facility.The 287,231-sf portfolio consists of three medical office properties of approximately 50,000 sf each, along with a 25,000-sf surgery center and a 120,000-sf, seven-story tower. Each of the five properties is master leased by St. Joseph Health System, which has an S&P credit rating of AAA. Smelter notes that the purchase price was $18.5 million more than an existing unsolicited offer made to the owner. Before listing the property, the owner had planned to accept the unsolicited offer, which was at the same value as a recent MAI appraisal. The transaction opened escrow on a contingency-free basis with a $10-million nonrefundable deposit, then closed within 30 days at a 6.6% cap rate.Smelter tells GlobeSt.com that the five buildings, which were constructed between 1972 and 1985, run at 100% occupancy and were built by the same group of doctors that developed Mission Hospital, the largest hospital in South Orange County, and later sold it to St. Joseph. Demand for medical facilities remains strong in South Orange County, he tells GlobSt.com, in light of the closings of other medical facilities in the county and the continuing population growth in Mission Viejo and surrounding communities. A total of 11 medical office facilities were sold in Southern California through the first six months of this year, according to Smelter, who heads the Marcus & Millichap Healthcare Real Estate Group, which tracks a database including 850 medical properties of 25,000 sf and larger in Southern California.