Western Real Estate Business

MAY 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

Issue link: https://westernrealestatebusiness.epubxp.com/i/978056

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Page 45 of 66

www.REBusinessOnline.com Western Real Estate Business • May 2018 • 43 The county only touted 146,000 square feet of MOB product under construction in the first quarter of 2017, though it experienced one of the highest absorption rates for this type of product. MOB absorption represented 2.5 percent of all existing Orange County inventory in the first quarter of 2017, according to CBRE, which is why developers are desper- ate to get additional projects off the ground. Those who haven't found the per- fect ground-up space are seeking out value-add opportunities near retail offerings. Such is the case with Me- ridian, which acquired The Laguna, a 57,057-square-foot medical office building across from the Laguna Hills Mall redevelopment this past Octo- ber. Laguna Hills Mall is undergoing a transformation into an indoor-out- door retail center and urban village called Five Lagunas. The Laguna also enjoys a prime address next to the 325-bed Saddleback Memorial Hospi- tal and adjacent to Laguna Woods Vil- lage, one of the largest 55-plus com- munities in Southern California. For John Pollock, Meridian's CEO, the deal was all about location and demographics. "This acquisition presented us with a rare opportunity to purchase a med- ical office asset located on-campus to one of the premier hospitals in Or- ange County," he says. "The South Orange County submarket has excep- tional demographics. Approximately 50 percent of the population within a one-mile radius of the property is 65 or older, which accounts for the high- est per-capita healthcare spending. We're looking forward to providing the community with a comfortable and inviting medical space that they can get to quickly and easily." Laguna Hills Mall isn't the only one receiving a little TLC. Meridian plans to invest more than $24 mil- lion into the property by the time it is fully leased. The Laguna was 74 per- cent occupied at the time of sale, with notable tenants like Simon Medical Imaging, South Coast Eye Care Cen- ter and Pacific Cardiovascular Associ- ates. The significant renovation will fully modernize the building, which was built in 1983, bringing it up to Class A standards. This will include aesthetic upgrades to the common areas like the lobby, hallways and re- strooms. Upgraded building systems, such as HVAC and lighting, will im- prove building efficiency. Safety stan- dards will be modernized by adding fire sprinklers throughout the entire building, in addition to other Ameri- cans with Disability Act (ADA) up- grades. Upgrades and prime locations, par- ticularly near populated corridors, are two trends very likely to continue in Orange County, if CBRE's MOB re- port is to be believed. "The need for quality MOB con- The Laguna was 74 percent occupied at the time of sale. It will undergo a renovation to fully modernize the building, which was built in 1983, bringing it up to Class A standards. *As of 12/31/17. © 2018 PGIM is the primary asset management business of Prudential Financial, Inc. (PFI). PGIM Real Estate Finance is PGIM's real estate fi nance business. Prudential, PGIM, their respective logos as well as the Rock symbol are service marks of PFI and its related entities, registered in many jurisdictions worldwide. PFI of the United States is not affi liated with Prudential plc, a company headquartered in the United Kingdom. ATLANTA | CHICAGO | DALLAS | LONDON | LOS ANGELES | NEW YORK | SAN FRANCISCO | TOKYO | WASHINGTON, DC PGIM Real Estate Finance is built on more than 140 years of commitment to the industry. Today, we're part of PGIM, the global investment management businesses of Prudential, with over $1 trillion in assets under management. We bring owners, developers and investors of all sizes deep insight on global real estate across the capital stack, with local expertise and a comprehensive approach to fi nancing. We offer a complete range of products, managed through a single point of contact: Prudential's investments portfolio, GSE, FHA, bridge, transitional and balance sheet lending. $91 BILLION IN REAL ESTATE ASSETS UNDER MANAGEMENT AND ADMINISTRATION* NEARLY $15 BILLION IN MORTGAGE ORIGINATION IN 2017 ONE OF THE LARGEST COMMERCIAL, MULTIFAMILY AND AGRICULTURAL LENDERS, INVESTORS AND SERVICERS LOANS IN 42 STATES AND 7 COUNTRIES Partner with the strength of our real estate fi nance experts at pgimref.com BUILD YOUR FUTURE ON OUR HERITAGE. tinues to grow," the report says of the county. "Most available product is 20-plus years old and has received minimal upgrades...The changing landscape of medi- cal care is also driving MOB tenants to revisit their real estate strategies. Historically, MOB on or near hospital campuses drove occupancy for the segment. However, as medical practices move toward a more consumer-ori- ented model, this is pushing many practices off-site and into retail centers in order to locate near their patients. The Laguna and MVMC may not be situated within Five Lagunas and the Shops at Mission Viejo, but their strategic location adjacent to these centers — not to mention the hospitals they serve — may allow their re- spective MOB investors to capitalize on the best of both worlds. n

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