By Meghan Hall
Investors looking to break into medical or life sciences real estate are taking matters into their own hands, and in the case of one investor, pursuing deals long before they were even intended to hit the market. In a transaction that closed at the end of November just before Thanksgiving, a dialysis center in South San Francisco traded for $12.404 million, or about $1,147 per square foot. According to Marwood Company and Epoch Realty Capital, who sold the property, the transaction was somewhat unexpected, as the firm had intended on holding onto the asset—until they received an offer they couldn’t refuse.
“We are selling because during construction, we actually had a broker bring an off-market buyer who was interested in acquiring once the project was completed,” explained Marwood Company Managing Director and Epoch Realty Capital Founder Matt Love. “It made sense to us at that point; we were not planning to sell it this soon, but we got a great offer.”
According to public documents, the buyer of the property was 160 Country Club LLC, affiliated with Floyd Brown of Palos Verdes, Calif. The transaction came in with of the highest price per square foot paid ever for a dialysis center in the Bay Area.
Located at 160 Country Club Drive, the asset is currently occupied by Fresenius Kidney Care, a dialysis center part of Fresenius Medical Care North America (FMCNA). Fresenius, according to the sales team, is a long-term, triple net tenant, a huge plus for investors in the current market. Love declined to comment on the remaining lease term.
“In this environment, just having the certainty of cash flow for many years to come is really attractive,” said Love. “It’s one of the few product types that’s really selling well right now in the COVID-19 market.”
Epoch Realty Capital first acquired the property in November of 2016 for $2.6 million, before the company was acquired by Marwood. At the time, the current asset was an aging, vacant building and the property itself was completely unentitled. Over the course of the next several years, the sellers worked with FMCNA to create a built-to-suit property that would fit their needs.
“North San Mateo County continues to see the life science and medical community expand and thrive. FMS will be a tremendous addition and is a great example of the growth this market is seeing,” explained Gary Boitano, Senior Director of Cushman and Wakefield.
Brokers Chris Sheldon and Marc Pope also helped to facilitate the deal.
Marwood and Epoch were originally anticipating holding onto the property for at least a couple of years after construction was completed on the site. However, demand for medical office buildings—especially in the space constrained Bay Area—has remained relatively strong over the course of the past six months thanks to their role as pivotal and essential infrastructure. Love predicts that moving ahead, fundamentals will continue to improve.
“Fundamentals and rents are holding strong, and I think the Bay Area is always a great long-term bet for real estate,” noted Love. “If you have a long-term outlook, I don’t think you can go wrong…The short-term impacts of COVID-19 will be short-lived. Fundamentals always come back around here.”