EXCLUSIVE: Medical Offices Sell Within 10 Days in Record Deal

Smelter, senior director of Marcus & Millichap's Health Care Real Estate Group, tells GlobeSt.com that the portfolio of properties in three Orange County cities attracted 18 offers and sold within 10 days, with 12 of the offers at or above the listing price. Jamison won the deal by offering the best terms and "deposited $1 million hard within 48 hours with no contingencies," Smelter says.

Smelter represented the seller, Vanguard Health Systems, with Jamison representing itself. The Vanguard portfolio, approximately 93% occupied at the time of the sale, consists of buildings on three separate hospital campuses in West Anaheim, La Palma and Huntington Beach.

The buildings are at 3010 W. Orange and 3055 W. Orange in West Anaheim, at 5451 and 5471 La Palma Ave. in La Palma and at 17822 Beach Blvd. in Huntington Beach. The buildings were completed in the 1970s and 180s.

Smelter describes the cap rate on the Vanguard deal as "remarkable, considering that 10-year US Treasuries are on the rise," but he adds that medical office buildings are among the most desired assets in commercial real estate today. When properties comparable to the Vanguard portfolio hit the market, Smelter says, the response from prospective buyers is typically similar to the bidding on the Vanguard properties.

"We've seen the same number of bidders on our last four listings. They've all had 12 or more offers in 10 to 14 days," Smelter tels GlobeSt.com. Prospective buyers typically include both private and institutional capital, although portfolios like the Vanguard properties usually attract more private capital because the institutional buyers prefer newer, class A buildings.

Despite the low cap rate, Smelter says the Vanguard portfolio holds the potential for increased yield in the future. "The rents have quite a bit of room to be bumped up over the next few years, so it's not just the existing cap but where it's going that made it so attractive to buyers," he says.