CalOptima, a county agency that provides healthcare coverage for children, the poor and the disabled, has bought a 10-story building in Orange that it plans to use as its new headquarters.
The public agency, which provides health coverage for more than 400,000 people, recently closed on the purchase of 505 City Parkway West, an office building next to the Block at Orange mall that has 205,000 square feet of space.
The building sold for $30.2 million, according to documents presented to CalOptima’s board of directors earlier this month.
The deal works out to about $149 per square foot.
The office buy is one of the largest here by a business for its own use in several years.
CalOptima now leases considerably less space at another Orange building about a mile away near St. Joseph Hospital-Orange.
The agency’s effectively out of space at its current site and doesn’t have room for community and board meetings, according to officials.
“We have no room at all to grow in our current office,” said Richard Chambers, CalOptima chief executive, in a recent letter to stakeholders.
The agency has relied on a good portion of its employees telecommuting to deal with crowded conditions at its current office. About 125 of its 470 employees telecommute.
Leases for CalOptima’s existing space are set to expire this year and in 2013.
The agency expects to need as much as 130,000 square feet of space by 2014, when last year’s federal healthcare reform is set to take hold in earnest.
CalOptima and other government-backed insurers are expected to see increased enrollment with the law’s provision for expanded coverage (see related story, page 7).
The agency was created by the Board of Supervisors in 1993 and set up as a county-organized health system. It’s the largest of six such health systems in the U.S.
CalOptima provides coverage to one in eight residents in OC, according to its website. It covers more than a quarter of the county’s children.
The agency hasn’t announced whether it plans to lease any of the excess space it will have at the building. There’s currently a few tenants at the office, and they’re expected to remain at the building in the short term.
It could cost another $10.6 million to make tenant improvements and other upgrades to the building, according to CalOptima.
The agency had about $150 million in reserves as of September. CalOptima has an annual budget of about $1.3 billion from the state’s Medi-Cal and other government programs.
The agency had been working on a plan for its office space for the past 18 months and considered a number of leasing and buying options, according to officials.
The company was represented by Grant Freeman, Joe Bevan and Ronda Clark, brokers with the Irvine office of Jones Lang LaSalle.
The sale appears to be a good one for the office’s former owner, Long Beach-based real estate investor Abbey Co., which was represented by Rickey Warner, Peter Wells and Mark Friend, brokers with the Anaheim office of CB Richard Ellis Group Inc.
Abbey bought the three-building City Parkway office complex, which includes the 505 City Parkway West building, in 2009 from Los Angeles-based Maguire Properties Inc., which now goes as MPG Office Trust.
The entire complex, which totals about 460,000 square feet, sold for about $53 million, according to real estate brokerage data.
That all-cash deal works out to about $115 per square foot for the buildings, about $34 less than what CalOptima is reported to be paying for 505 City Parkway West.
Kurt Kaufman, Abbey’s director of acquisitions, confirmed the sale but declined to name the buyer, citing a confidentiality agreement.
Abbey put the entire City Parkway property up for sale as a whole, “but this buyer stepped up,” Kaufman said.
The company now plans to hold on to the other two buildings at the complex and lease them up, he said.
Abbey’s still on the lookout for other deals in the area, Kaufman said.
