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Saturday, Aug 13, 2022

REIT Builds Laguna Hills Office Cluster

Healthcare Realty Trust Inc.’s investment spree around MemorialCare’s Saddleback Medical Center has now topped $175 million, following its fourth deal in a year and a half in the vicinity of Orange County’s ninth largest hospital.

The Nashville, Tenn.-based real estate investment trust’s latest acquisition comes a little more than a month after its third buy near the South County hospital, located next to the former Laguna Hills Mall. It also marks the fifth reported buy in OC for the medical office-focused firm since the start of 2020; in addition to Laguna Hills, it has also bought a medical office property in Orange.

The REIT has spent close to $200 million in OC since early 2020, according to property records. It is among the largest commercial real estate investors in OC over that time.

Records indicate that Healthcare Realty recently closed on the $24.6 million purchase of the Saddleback Professional Center, a 72,928-square-foot medical office property in Laguna Hills at 24012 Calle de la Plata.

The four-story office was about 77% leased at the time of sale, to a cluster of largely medical-related tenants, as well as California Bank & Trust, according to CoStar Group Inc. records.

It was sold by an affiliate of Santa Monica’s Miramar Capital, according to property records.

The office is located next door to The Laguna Building, a five-story multi-tenant medical office which Healthcare Realty bought in April for $31.3 million.

Both those properties are across the street from one of the city’s more distinctive-looking buildings, the nearly 89,000-square-foot Taj Mahal office, which the REIT bought early last year for about $42 million.  

“We now have a sizable portfolio around this hospital which places us at the center of deal flow,” Rob Hull, Healthcare Realty’s executive vice president of investments, said in a recent call with analysts.

Growing Cluster

Saddleback Professional Center is part of the campus that surrounds Saddleback Memorial, a 248-licensed bed hospital with nearly 1,400 full-time employees and about $360 million in annual revenue for 2020.

Miramar Capital sold the building for about $337 per square foot; Mike Adams and Morgan Adams of Stream Realty Partners in Irvine represented Miramar in the sale.

Miramar has implemented upgrades over the past few years at the building, which was first built in 1982.

“Saddleback Professional Center is the largest sale year-to-date with a medical component in South Orange County,” Adams said. “This is a direct result of Miramar Capital’s deliberate approach to strategically position this building for success, becoming the preeminent landlord in the area.”

Healthcare Realty now has a Southern California portfolio spanning north of 1 million square feet, much of which is in Orange County. Southern California is its third-largest market, after Seattle and Dallas.

The company kicked off its recent Laguna Hills buying spree in January of last year, when it bought the Taj Mahal medical office at 23521 Paseo de Valencia.

At the end of 2020, Healthcare Realty made its largest local investment to date when it shelled out $80.6 million for the nearly Saddleback Medical Building. It bought the 135,904-square-foot office, at 23961 Calle de la Magdalena, from Irvine-based Greenlaw Partners.

Bullish Buyer

The REIT reported spending $129 million in the first five months of the year across 10 properties in Southern California and its other core markets.

“As we deliberately build scale and target markets, we are often viewed as the preferred buyer for buildings,” Hull said.

“This is especially noteworthy as more buyers have moved back into the market, and pricing remains competitive.”

Healthcare Realty Chief Executive Todd Meredith noted in the REIT’s latest conference call that Southern California, specifically Orange County, has outperformed other markets where the firm “has seen tremendous engagement and momentum.”

Having a large portfolio in the vicinity of Saddleback Hospital is paying dividends, according to Hull.

“Recently, a practice from another submarket had a need to expand into this area,” he told analysts. “We were able to show them a range of locations, price points, and interior finish levels. Having multiple product types was instrumental in keeping them exclusively engaged with us throughout their decision-making process.” 


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