Meridian's Largest Acquisition in a Year

LOS ANGELES—Meridian has purchased the Cotton Medical Center in Pasadena for $37.5 million, marking one of its largest acquisitions in more than a decade and its largest Los Angeles investment to date, and marks the investor's entry into the Southern California market. Meridian plans to spend an additional $5 million to upgrade the 115,000-square-foot medical office property, making the total capitalization of this investment $50 million.

The buildings are right in our wheelhouse. They are well located, quality buildings that need some attention to make them competitive and relevant to healthcare providers in today's dynamic market place," John Pollock, Meridian's COO, tells GlobeSt.com. "This acquisition provided us with an opportunity to acquire a fee-simple interest in a fundamentally strong market in Southern California, adjacent to a great hospital, Huntington Memorial and another one under construction, Shriners Hospitals for Children. Also, its proximity to Old Town Pasadena, LA Metro's Fillmore Station and convenient access to the 110, 210 and 134 freeways were important. 

Although this is a large acquisition for the investor, it isn't outside their range, according to Pollock. "While larger than any previous single transaction, the purchase of Cotton Medical Center is within our investment size and represents a great value-add market entry into Southern California," he says. "When the opportunity arose to acquire the Cotton Medical Center from the property's original owners, Meridian was eager to pursue these two multi-tenant medical office buildings and adjoining parking garage."

The firm typically focuses on the Northern California market, but saw this as the perfect opportunity to get a strong foothold in Southern California, where the firm plans to do more investment. "This transaction also opens the door to a much larger pool of potential acquisition targets," he says. "On the one hand, the value-add healthcare pool of buildings in Los Angeles and Orange County is three times the size of the Bay Area, so in that sense, it does open the door to more acquisition targets. On the other hand, the asset itself also opens up the opportunity to work with a larger number of tenants both in the Pasadena and surrounding markets."

The value-add plan includes modernizing the aesthetic as well as making the building more efficient and safer. "While the center's buildings are well-located, their interiors and amenities have not kept pace with the marketplace and the occupancy reflects this difference," adds Pollock. "The overarching strategy is make larger contiguous spaces available that will be attractive to the groups that are consolidating in this market. We plan to position these buildings as top class-B assets that meet the needs of the providers while offing a more affordable rate than the competing class-A building in the market." The property was 71% leased at the time of sale.

Colliers International's John Erickson and Brent Weirick represented Meridian in the transaction, while Fred Cordova, Ryan Eddy and Michael Puleo of Kennedy Wilson and William Boyd, Linda Lee and Scott Unger of Charles Dunn represented the seller, Cotton Medical Center LLC, a group of doctors involved in the property's original development.