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Abbey Pays $11 Million for San Diego Medical Building

The Abbey Co., a Garden Grove real estate company, has bought its first medical office building in La Mesa in what the company calls the start of more buying in San Diego.

Abbey paid $11 million to buy Fletcher Parkway Medical Center from the Archon Group of Irving, Texas, said Robert Albrecht, Abbey’s director of acquisitions. The purchase, he said, provides “regional portfolio diversity” for Abbey, which up to now has owned retail centers and commercial and industrial properties in San Diego and elsewhere.

“This had been on the market for quite some time,” Albrecht said of the 83,980-square-foot Fletcher center. Abbey is looking at a couple of other medical office buildings in San Diego as possible buys, he said.

The Fletcher building’s advantages include its proximity to Grossmont Hospital, a major area healthcare facility, and the Interstate 8/state Route 125 interchange, Albrecht said. Fletcher Parkway Medical Center has three stories and is located on nearly six acres of land.

Tenants include large doctors’ groups, a pediatric specialty group, the Boston Men’s Health Center and a self-contained surgery center operated by HealthSouth Corp., Albrecht said. It is 85% occupied.

“On this particular asset, it will not require much repositioning,” said Albrecht, who is moving his office from Garden Grove to La Mesa Village Station, a retail center owned by Abbey. Fletcher Parkway Medical Center’s vacancies could be filled by existing tenants looking to expand, he said.

Medical office buildings are sometimes challenging because they have “extremely high” costs for tenant improvements, Albrecht said. “You have to tweak them differently.”

Abbey is charging $1.65 a square foot for space in Fletcher Parkway Medical Center, Albrecht said. Under that rate, tenants pay a prorated share of the building’s maintenance, insurance and taxes, plus their own utilities. Medical office rents in nearby Encinitas are running as high as $2.60 a square foot.

Abbey has looked to buy medical office buildings in Orange County, but “we haven’t found the right fit,” Albrecht said.

Abbey’s San Diego property portfolio includes the Rancho Carmel Commerce Center and Escondido Commerce Center, two retail holdings. So far this year, the company has purchased four office and retail properties comprising 344,000 square feet in Los Angeles, San Diego, Riverside and Kern counties.

Abbey, founded in 1990, has a total portfolio exceeding 3.1 million square feet. The company handles acquisitions, leasing, property management and construction services.

Abbey’s operating mode involves buying Class B or Class C properties with economic or physical problems. The company then upgrades and repositions them in order to enhance their value and improve cash flow via higher occupancy rates and rents. The company tends to hold its properties for long-term appreciation and ongoing revenue growth, Albrecht said. n

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