Orange County Business Journal: Cypress West Nears $100M With Medical Office Buy
By Mark Mueller
Cypress West Realty Partners LLC, a Ladera Ranch-based investor in healthcare properties, has made a medical building in Rancho Santa Margarita its first local purchase.
The company, which began operations last year and is approaching $100 million worth of acquisitions, recently completed the purchase of 22032 El Paseo, a two-story medical office next to the Rancho Santa Margarita Town Center.
The 23,280-square-foot office, known as Mission Health Center, was purchased for about $7.8 million, or $335 per square foot, from an affiliate of PNC Bank.
Cypress West has been busy buying medical properties elsewhere in California and Arizona this year.
Other recent deals for the company include medical office properties in Riverside, Chula Vista, Claremont and Glendale, Ariz.
The Rancho Santa Margarita purchase puts the Cypress West healthcare portfolio at 321,000 square feet. Deals struck so far have totaled about $87 million, and the company has another $11 million purchase under contract, according to Cypress West principal Chris Cumella.
“We should hit $100 million by year’s end,” Cumella said.
The company is looking to acquire another $100 million of deals in 2015, he said.
Partners, Strategy
Cypress West said it has partnered with an assortment of institutional investors, high-net-worth individuals, and family offices for its initial purchases.
The company describes its acquisition strategy as one that includes a solid base of core assets while targeting specific strategic value-add opportunities.
The Mission Health Center purchase appears to fall into the latter category.
The building, which opened in 2001, is about 77% leased to a group of medical and dental tenants. Mission Hospital Regional Medical Center is the largest tenant at the building and occupies 34% of the space there.
Cypress West’s purchase represents the the second sale of Mission Health Center this year. A loan servicing arm of PNC bought the property in March for $6 million in a lender-driven trustee sale.
The property had nearly $9 million of debt tied to it at the time of the trustee sale, according to property records.
Current monthly asking rates run about $2.25 per square foot at the building; rents there are nearly 35% below the asking rates from peak levels reached five years ago, according to marketing materials for the property from the Irvine office of Avison Young.
Avison Young’s Dan Vittone and Alan Pekarcik represented PNC in the latest sale of the office, which is a few blocks from the Foothill Transportation Corridor (241) toll road, near Santa Margarita Parkway.
“Our strategy for the property is to lease up the remaining space with complementary practices to further enhance the strong referral network already in place,” said Cypress West’s other principal, Jeff Johnson.
“Ownership has strong commitment to attract new tenants with generous tenant improvement allowances,” he said.
Leasing and property management will be handled internally by Cypress West, according to the company, which got a $7.5 million loan from General Electric Capital Corp. to fund the Mission Health Center purchase.
Location
The property’s location next to Rancho Santa Margarita Town Center, a 29-acre retail center, should be a good drawing card for potential tenants, according to the new owners.
Placing medical offices within walking distance of malls and other large shopping centers is becoming more of a preference for tenants.
Newport Beach-based real estate developer NCA Real Estate recently took the wraps off its plans for Mission Viejo Medical Center, a 110,000-square-foot office building it plans to construct between Mission Hospital and the Shops at Mission Viejo.