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Friday, Dec 9, 2022

A Healthy Market for Healthcare Development

Orange County has seen a consistent batch of new office product built over the latter part of the latest market cycle, adding several million square feet of high-end inventory in markets including Irvine, Tustin and Newport Center.

The cycle has been a boon to multifamily developers, too, with thousands of mid-rise units springing up in former commercial spots across the county.

Even the industrial development market, often an afterthought locally with developable land in short supply, has seen its share of growth. Large (for OC) projects have been built with some frequency in the northern and western parts of the county and more recently closer to John Wayne Airport (see story, page 33).

With a pandemic-created recession now in its early stages, and questions over the length and severity of its impact (see story, page 1), a different sector looks poised to withstand a likely decline in new construction: healthcare.

Several billion dollars’ worth of large-scale medical projects are in various forms of the planning stage locally, including hospitals, specialty care services, and research and development facilities.

Beyond short-term gains in regards to construction jobs, the work aims to position OC as a national leader in the medical field for decades to come.

“This is not about buildings,” said Robert Stone, chief executive officer of Duarte’s City of Hope, one of several healthcare groups planning near-term projects, when speaking of his group’s plans.

“It’s about developing a nexus of unsurpassed medical expertise, future-focused communities, groundbreaking technology, and innovation.”

Hope’s Start

The biggest healthcare project currently moving ahead in OC involves City of Hope, and its plans for a new campus at Irvine’s FivePoint Gateway office complex.

Plans have been in the works for over a year, but became more concrete late last month, after City of Hope bought a currently vacant, 190,000-square-foot, four-story building at the complex, which is also home to the local operations of chipmaker Broadcom Inc.

The $108 million purchase—tops for the year among area commercial real estate deals—also includes some 11 acres of excess land.

City of Hope will convert the building at 15161 Alton Parkway into its first comprehensive cancer center outside of its main campus in Duarte.

It’s also the beginning of a $1 billion investment by City of Hope to build what it calls “a world-class comprehensive cancer center” on its just-bought land.

“We are ‘all in’ for the region,” said Annette Walker, president, City of Hope Orange County.

The center, along with a future acute care cancer hospital to be built by City of Hope on the same site, will anchor what FivePoint and City of Hope believe will one day become a regional hub for a larger wellness campus in Irvine.

Expect to see “blue-chip physician groups, wellness specialists and related research and innovation activities,” according to a press release announcing the deal.

The adjacent hospital will be Orange County’s only specialty cancer hospital focused exclusively on treating and curing cancer, according to City of Hope.

Master developer FivePoint Holdings LLC, based in Irvine, said the healthcare partnership forms the basis of a model it could eventually introduce, with City of Hope, into its other California communities.

“The outpatient cancer treatment and research center and the cancer hospital will be world-class additions to the campus and larger community,” said Lynn Jochim, FivePoint’s chief operating officer.

FivePoint Chairman and CEO Emile Haddad added: “There has never been a moment in history more important than now to act boldly to make wellness and health care the foundation of every sustainable community of the future.”

Hoag Happenings

FivePoint’s project isn’t the only large hospital expansion plans in the works.

About 3 miles away, Hoag Memorial Hospital Presbyterian has expansion in mind, at the site of its Irvine campus.

Newport Beach-based Hoag, which opened its 154-bed Hoag Hospital Irvine campus in 2010, has a deal in place to buy the Irvine property from its Irvine-based landlord, Healthpeak Properties Inc. (NYSE: PEAK).

The deal is for $226 million and is scheduled to close in about a year, according to regulatory filings. It’ll be one of the larger property acquisitions seen in Orange County in recent years, once complete.

The deal is not just about the existing property; the purchase price also includes land adjacent to the hospital, according to Healthpeak.

The sale is expected to pave the way for additional expansion at the Irvine facility, although details have yet to be confirmed by Hoag, which is seeking to end its affiliation with a larger healthcare group, Renton, Wash.-based Providence (see story, page 1).

UCI’s Vision

The University of California-Irvine also has a nearly $1 billion plan in the works for Irvine.

Documents filed by the UC governing body indicate the school is looking to “expand its medical enterprise and improve access to world-class healthcare by establishing a new medical complex in Irvine.”

Such a complex would offer inpatient, ambulatory, and emergent care services, filings indicate.

The development would construct a hospital, a multispecialty ambulatory care center, central energy plant, and required parking for patients, visitors, and staff. It would go up on a nearly 25 acre site of largely undeveloped land on the North Campus of UCI, just off Jamboree Road.

“The site is centrally located in a growing market with a favorable payer mix and currently lacks an equivalent competitor for specialty services,” UC filings indicate.

The new facility “is not intended to be a replica of the full-service Orange campus” of UC Irvine, which hold OC’s largest hospital, filings note.

The overall project cost is estimated within the range of $850 million to $950 million. Given the financial hit the school system is taking amid the pandemic, a time frame for moving ahead has not been disclosed.

Samueli Start

UCI already has one big medical project underway on campus: a $185 million health sciences complex for integrative patient care, training and research. Site work, near the Gavin Herbert Eye Institute, started earlier this year.

The 9-acre development site on the corner of Bison and California avenues will include a five-level, 108,200-square-foot building for the Susan and Henry Samueli College of Health Sciences and a four-level, 71,500-square-foot building for the Sue and Bill Gross School of Nursing.

The health sciences building will be home to the Susan Samueli Integrative Health Institute, and is also expected to hold the school’s new School of Pharmacy & Pharmaceutical Sciences and School of Population Health.

The Samueli family donated $200 million to build the school.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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