Santa Ana-based Grubb & Ellis Co.’s healthcare unit has bought a Cypress office building for $25.7 million.
Grubb & Ellis Healthcare REIT Inc. bought the 104,000-square-foot building on 5995 Plaza Drive that serves as the regional headquarters for UnitedHealth Group Inc.
The building previously was the corporate headquarters of PacifiCare Health Systems Inc., which Minnesota-based UnitedHealth bought in 2005 for about $9 billion.
The building, which is solely occupied by UnitedHealth, sold for $247 a square foot.
The seller was an unaffiliated institutional investor, known as Realty Associates Fund VI LP, according to CoStar Group Inc.
There was strong interest in the UnitedHealth building, said Bob Smith, one of the brokers who represented the seller.
A big draw: UnitedHealth re-signed its lease for five more years.
Potential buyers “were very comfortable with the credit of UnitedHealth. There was a deep interest from the investor pool,” Smith said.
UnitedHealth is paying $1.94 million in rent this year on the building, according to a Securities and Exchange Commission filing by Grubb & Ellis. The filing says the health insurer’s rent will go up to $2.3 million in 2013, the last year of the new lease.
Grubb & Ellis liked several things about the building, said Daniel Prosky, the company’s executive vice president of healthcare acquisitions.
“You’ve got a good credit tenant in UnitedHealth. You’ve got a nice building in a good location,” Prosky said.
Having a tenant such as UnitedHealth “certainly is more important now than it was nine months ago from a lender’s point of view,” Prosky said. A tenant with credit that has a low risk of default in healthcare is an exception these days, he added.
Grubb & Ellis financed the buy through its own line of credit and from money raised by a healthcare fund to buy medical buildings.
Another draw: UnitedHealth’s entrenchment in Cypress. Prosky mentioned the health insurer, which operates the No. 3 health maintenance organization in Orange County by enrollment at some 232,000 members, leases space in several other buildings in the general area, near Valley View Street and Katella Avenue.
No Renovation Plans
Grubb & Ellis said it has no renovation plans for the building.
The building was “actively marketed” by the seller, said Robert Giusti, Grubb & Ellis’ associate vice president of acquisitions. Giusti called the timeline “relatively quick, 45 days or less.”
About 420 people work out of the building, including David Hansen, UnitedHealth’s regional chief executive.
PacifiCare has occupied the building for some 15 years, Smith said.
UnitedHealth’s building was completed in 1986. It has 445 parking spaces and is close to a trio of major freeways: San Diego (405) Freeway, San Gabriel River (605) Freeway and Garden Grove (22) Freeway.
Overall, healthcare real estate is a good investment because it’s “fairly recession-proof,” Prosky said. He cited figures showing that healthcare has grown “at 6% to 7% during the last 15 years whether in economic expansion or economic recession.”
Grubb & Ellis’ healthcare unit buys hospitals, medical office buildings that house doctors, assisted living facilities and nursing homes, as well as buildings that have medical-related tenants.
The UnitedHealth building “fit very well within that basket,” Prosky said.
Smith, Mike Kane, Karen Scholte and Paul Jones of CB Richard Ellis Group Inc.’s Newport Beach office and Kevin Shannon, who works out of the brokerage’s Torrance office, represented the seller.
