The Nashville, Tenn.-based REIT (NYSE: HR) recently closed on the $31.3 million purchase of The Laguna, a 57,573-square-foot medical office property in Laguna Hills, located at 24022 Calle de la Plata.
The property is part of the campus that surrounds MemorialCare Saddleback, a 248-licensed bed hospital with nearly 2,000 full-time employees.
It’s the fourth buy for Healthcare Realty in OC in a little more than a year, and its third buy of a property within the vicinity of the South County hospital. Saddleback ranks No. 9 among the county’s largest hospitals, with about $374 million in annual revenue for 2019.
Walnut Creek-based Meridian was the seller; Evan Kovac and Andrew Milne, both managing directors at JLL, represented Meridian in the sale.
Meridian Disposition
Meridian acquired the Laguna office in 2017 for $19.9 million, or about $346 per square foot.
The company, which operates locally out of Newport Beach, has since invested north of $2 million in upgrades for the building, which was first built in 1983.
“It was exciting to see our investment thesis play out on this property,” said Meridian’s Vice President of Acquisitions R.J. Sommerdyke.
“When we purchased the asset in 2017, medical office vacancy was approximately 25% in this immediate submarket, which scared a lot of other investors away,” he added, noting that a bulk of this vacancy was in a neighboring building that was undergoing a significant renovation.
“We felt strongly that once the renovations of the neighboring building were completed, there would be significant absorption and vacancy would fall in line with the larger Orange County market—approximately 8%—which is exactly what happened.”
Demand for the medical office sector has also been bolstered in the wake of the pandemic, as investors take a closer look at properties with strong healthcare-focused tenancy.
The Laguna is currently about 74% leased to a mix of medical tenants.
Local Investments
The deal trails Healthcare Realty’s $80.6 million acquisition of the nearby Saddleback Medical Building at the end of 2020.
It bought the 135,904-square-foot office at 23961 Calle de la Magdalena from Irvine-based Greenlaw Partners.
Healthcare Realty made its another local buy in the city in February of last year, when it paid $42 million for the well-known, 88,538-square-foot Taj Mahal medical office at 23521 Paseo de Valencia.
In between the Laguna Hills deals, the REIT also paid $14 million for Sycamore Medical Plaza, a 24,000-square-foot building next to Providence St. Joseph Health’s hospital in Orange.
The REIT’s Southern California portfolio now tops the 1 million-square-foot mark, with a growing focus in Orange County.
