A newly built medical office complex in Newport Beach has traded hands at one of the highest per square foot prices ever seen for a non-hotel property in Orange County.
Newport Heights Medical Campus, a two-building complex along Birch Street that opened last year near the Newport Beach Golf Course, last month was bought by LaSalle Investment Management Inc., a real estate investment subsidiary of Chicago-based commercial brokerage JLL.
LaSalle paid $50.5 million for the two fully occupied buildings, which brokerage data indicates total nearly 60,200 square feet. That equates to $840 per square foot.
It’s the highest per-square-foot price paid over the past decade for an office or medical office property 20,000 square feet or larger, according to data from real estate market tracker CoStar Group Inc. Only a handful of other larger commercial properties in the area, primarily waterfront hotels, have sold at higher prices, CoStar records indicate.
The lofty price is reflective of the Newport Beach location, its medical uses, and the building’s age, according to brokers that worked on the deal.
It’s a “trophy deal for two Class A medical buildings,” said CBRE Group Inc.’s Chris Boden, who brokered the deal on behalf of the seller.
Lee Asher, Shane Seitz, Ryan Lindsley and Sabrina Solomiany of CBRE were also involved in the transaction.
REDA, Bascom JV
A venture led by Newport Beach-based Real Estate Development Associates LLC, an investment company that buys and develops office and industrial properties in Southern California, headed the project.
REDA, as it is also known, had two partners in the deal: Bascom Group, an Irvine-based real estate owner and investor best known for its large apartment holdings; and Westminster Capital LLC in Lake Forest, Ill.
The group bought the 4.5-acre site, a few blocks south of Bristol Street, in 2015 when the land was empty.
The project broke ground in 2016 and was delivered on a speculative basis in 2017. It was a first for REDA, which typically invests in industrial properties in the Inland Empire.
The site is about 5 miles from Hoag Memorial Hospital Presbyterian in Newport Beach.
There’s a lack of new space for medical tenants in the area, which drove tenant and investor demand for the project, said Jason Krotts, REDA co-founder and principal.
The 18,303-square-foot 20350 Birch St. property at the complex is leased to UCI Health, while the 41,883-square-foot latter building is occupied by several medical tenants, including Eden Fertility Management and Starpoint Health.
Most tenants at the building moved in at the start of the year.
“The project went really well, and we want to continue to look for more opportunities like this in Southern California,” Krotts said.
The property brought in close to a dozen offers, according to CBRE’s Boden.
South Coast Metro, Brea
It’s the third notable area purchase for LaSalle Investment this summer, and the second involving a medical office.
In July, the Business Journal was first to report on its $55 million buy of 4 Hutton Centre, a 216,864-square-foot office building in the South Coast Metro area of Santa Ana.
That 10-story office tower next to the Costa Mesa (55) Freeway sold for about $253 per square foot.
Also in July, it paid about $37.7 million for Brea’s 2767 E. Imperial Highway building, a nearly 96,000-square-foot office that’s fully leased to St. Jude Hospital Centers for a rehabilitation and wellness division. It recently extended its lease there for 15 years, according to marketing materials from brokerage HFF.
The Brea office, known as the Brea Imperial Center, sold for nearly $395 per square foot.
SJC Deal
LaSalle manages nearly $70 billion of assets in private and public real estate property and debt investments; its client base includes public and private pension funds, insurance companies, governments, corporations, endowments, and private individuals from across the globe.
Another real estate investment offshoot of the Chicago-based brokerage, JLL Income Property Trust, has also paid top dollar for a newly built medical office in OC.
In 2016, the real estate investment trust paid a reported $26.4 million for the San Juan Medical Center, a 40,250-square-foot medical office in San Juan Capistrano.
That property was built by Accretive Realty Advisors Inc. in 2015; it sold for about $655 per square foot, among the highest-priced medical office deals in OC of late, prior to the just-completed Newport Beach facility. n
