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Newmark Grubb Knight Frank (NGKF) Global Healthcare Services and Cornish & Carey Commercial Newmark (C&CCNewmark) have completed the sale of three medical office buildings in Orange County, Calif., on behalf of Accretive Realty Investment, LLC (Accretive Realty) following the completion of repositioning programs by Accretive Realty that substantially boosted the value of each property. The undisclosed buyer, a private equity fund, acquired all three buildings for approximately $41.4 million in separate transactions.
The most recent of the transactions involved Oceanview Medical Center, a four-story, 30,931-square-foot medical office at 675 Camino de los Mares in San Clemente, Calif. Fully occupied, the property sold for $15.7 million at a cap rate of 5.3 percent. Accretive Realty paid $10.5 million to acquire the asset in November 2012, which was less than 80% leased at the time of acquisition. By moving some tenants out of the building and relocating others between floors, it was able to open up a full floor to accommodate MemorialCare Health Foundation, which now occupies the first and second floors.
The second transaction involved Pacific Park Medical Dental, a 21,438-square-foot, three-story medical office at 24541 Pacific Park Drive in Aliso Viejo, Calif. The 90-percent-occupied property sold for $10.4 million at a cap rate of 5.25 percent. Accretive Realty acquired this property for $6.5 million, also in November 2012, and invested additional capital over the past year to improve the common areas of the building.
The third and previously announced sale occurred in October 2013, when the buyer acquired Aliso Viejo Medical Center, a 27,192-square-foot, three-story, Class A medical office building at 24502 Pacific Park Drive in Aliso Viejo. Accretive Realty had purchased the property for $7 million in August 2010 and completed a thorough full-building renovation before marketing the asset for resale. It also secured a lease renewal with its largest tenant, Kaiser Permanente, in mid-2013, with NGKF acting as leasing agent.
Garth Hogan and Todd Perman, CCIM, both executive managing directors with NGKF Global Healthcare Services, and Richard Bland, a senior vice president with C&CCNewmark in Hayward, Calif., represented Accretive Realty in the transactions. Gary Naillon with Guggenheim Realty Group is the exclusive advisor for the buyer, which is also repositioning its portfolio.
Thomas LeBeau, chief executive officer, Accretive Realty Investment, LLC, said, “Our strategy is to seek out value-add properties that can be effectively repositioned for the current demands of the medical care community as well as appeal to the growth needs of the larger healthcare service providers. In this way, we can convert underperforming assets into well-positioned core plus properties that are better suited to an investment portfolio.”
“Very low cap rates underscore the stability of medical office and show there is far more capital chasing medical office than available supply,” Mr. Hogan said.
“Private capital is moving aggressively into this sector,” he continued. “And while Orange County is a high barrier to entry market, there are still opportunities in a number of under-served communities to reposition medical office properties in a way that helps the healthcare providers gain greater exposure for their brand.”
Mr. Bland commended Accretive Realty’s execution of value-add strategies for all three assets.
“Through capital improvements and strategic leasing with synergistic tenants, the buildings quickly reached their maximum potential,” Mr. Bland said. “This portfolio represented an opportunity to acquire core set of buildings with a stable and reliable cash flow further offering a diversified tenancy with staggered lease expirations. For a Northern California buyer, the proximal locations also ensure streamlined management with economies of scale.”
About Cornish & Carey Commercial Newmark
A dominant regional real estate force since 1935, Cornish & Carey Commercial Newmark has an expansive reach as part of one of the largest commercial real estate service firms in the U.S. Regionally, Cornish & Carey Commercial Newmark has more than 310 agents in 13 strategically located offices throughout Northern California, creating a powerful platform from which to deliver superior services locally, while upholding its core values of integrity and knowledge. For further information, visit www.ccareynkf.com.
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank is one of the world’s leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF’s 12,000 professionals operate from more than 320 offices in established and emerging property markets on five continents.
With roots dating back to 1929, NGKF’s strong foundation makes it one of the most trusted names in commercial real estate. NGKF’s full-service platform comprises BGC’s real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc. (NASDAQ: BGCP), a leading global brokerage company primarily servicing the wholesale financial and real estate markets. For further information, visit www.bgcpartners.com.
About Accretive Realty Investment, LLC
Accretive Realty Investment, LLC, through its management company Accretive Realty Advisors, Inc., was formed to acquire, develop and manage medical assets throughout California. Accretive Realty maintains a multi-disciplinary team of professionals that combine over 60 years of realty expertise in the management, development, accounting and marketing of commercial real property and medical assets. Accretive Realty’s key executives and staff have extensive experience in the entitlement, development planning, and construction including extensive experience in office building and tenant improvement construction of complex medical related uses. For further information, visit www.accretiverealty.com.