PHOENIX-A California medical office investor has purchased the Arizona Medical Plaza in West Phoenix for $3.4 million, getting an 83%-leased asset primed for lease-up by a series of upgrades and Baptist Hospital’s turnaround.

“There were some tenants that were going out and others that wanted to renew, but had some tricky TI requests. Historically it had been slow finding new tenants, but that has ramped up in last 12 months,” Eric Wichterman, a senior vice president with Grubb &Ellis/BRE Commercial in Phoenix, tells GlobeSt.com.”Future prospects on the building look really good.”

Arizona Medical Plaza LLC of Irvine, CA, purchased the building from Phoenix-based Ensemble Investments LLC after nine months of marketing. The seller entered escrow once with a prospective buyer who subsequently dropped the sale during due diligence. The buyer’s willingness to negotiate a difficult loan assumption was key to the deal, says Wichterman. “We really needed a buyer with the stomach to operate in that area and take on the project,” says the deal’s sole broker.

The buyer assumed a $1.9-million loan, with a 2010 maturity, provided by Monumental Life Insurance Co. of Baltimore at an 8.32% fixed-rate interest, Wichterman says. The balance can be prepaid beginning in 2005. The buyer completed the balance of the purchase with cash, closing at $100,000 below the asking price.

Located at 1728 W. Glendale Ave., the five-story Arizona Medical Plaza was built in 1972 and upgraded several times since 1999. Ensemble’s tenant improvements proved the most successful, says Wichterman, as the former owner strove to expand suites and remove unnecessary common areas in an effort to improve leasing. Occupancy was 83% at closing.

Leasing in the building and others like it have benefited from Baptist Hospital’s recent turnaround. Renovations instituted by Vanguard Health Systems, the hospital’s owner, have subsequently helped lure new medical tenants to the submarket.

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