By Jon Peterson
San Francisco-based Kaiser Permanente Northern California has agreed to acquire a 210,000-square-foot, to-be-developed medical office building from Pasadena-based Alexandra Real Estate Equities for $55.2 million at 1600 Owens St. in Mission Bay. The deal is expected to close in December.
“This transaction is a good deal on many fronts. It will allow us to open a new medical office building two years earlier that we could have done on our own, and there will also be a cost savings,” said Joe Fragola, media relations specialist for Kaiser. He would not say, however, how much the cost savings would be.
Kaiser considered development of a new building at 16th and Mississippi streets in the San Francisco’s lower Potrero Hill district. This development was going to be done with San Mateo-based Walden Development for a project totaling around 200,000 square feet. Once the opportunity with Alexandria came along, Kaiser ended its interest in the other project.
Alexandria will manage construction of the property on a fee basis and then sell it to Kaiser. Construction will start once the land sale to Kaiser has closed. “There were a couple of reasons why we decided to pursue a sale of the building. This transaction is a way for us to have more cash available for income-producing properties. Also, Kaiser had a big desire to own the building,” said Joel Marcus, chief executive officer for Alexandria.
The new building will house outpatient services and should allow for better service for its existing customer base. Right now many patients travel to its existing 2238 Geary Blvd., 4141 Geary Blvd. and 4131 Geary Blvd. offices aboard multiple buses or by driving connected city streets. Many of the employees in those locations will be moved to 1600 Owens.
The actual amount of employees to be located at the new building has not been determined, Fragola said. The employees include doctors and nurses.
Alexandria has a very large presence in the San Francisco Bay Area. It owns a total of 26 properties in the region totaling 2.87 million square feet. This includes 2.5 square feet of operating properties, 330,000 square feet under development and 36,473 square feet that are being re-developed. The portfolio was 97 percent occupied as of the end of June. The Bay Area assets make up 17 percent of the public REIT’s total portfolio.