Historic VA-Leased MOB in Baltimore Sells

The medical office building in the Lexington Market/Inner Harbor area of Baltimore sold for nearly $180 per square foot.

Baltimore—Marcus & Millichap has brokered the sale of the Baltimore VA Annex, a 74,000-square-foot medical office building that is fully leased to the U.S. Department of Veterans Affairs (VA), the company announced late last week. The approximately $12.3 million sales price equates to nearly $180 per square foot.

Baltimore VA Annex

Baltimore VA Annex

The identities of neither the seller, described as a regional investor with a diverse group of assets, nor the buyer, a Seattle-based entity investing in the Baltimore market for the first time, were disclosed.

The building, at 209 W. Fayette St. in the Lexington Market/Inner Harbor area, is three blocks from the 137-bed Baltimore VA Medical Center and serves to augment the clinical, research and administrative programs there. Built in 1920, the property was used by Catholic Relief Services before the VA took occupancy in 2010.

The VA recently extended their lease by five years and expanded the facility by 6,800 square feet and has invested more than $4 million in building and tenant improvements.

The seller was represented by M&M’s John Smelter, a senior director of the company’s Healthcare Real Estate Group; Ryan Gonzales, an associate with the Healthcare Real Estate Group; Robert Filley, a senior associate in the Washington, D.C., office; and Chris Beck, an associate in the Baltimore office.

“The transaction presented challenges due to the fact that shortly after we began marketing the property, the VA decided to expand the premises,” Gonzales said in a prepared statement. “By the time the expansion negotiation was complete, the VA had less than five years remaining on its lease, which made it more challenging to market the property. Working closely with the buyer, we were able to demonstrate to this first-time investor of GSA properties the VA’s commitment to the location.”

“This transaction demonstrates investors’ continued interest in the Baltimore market, which is a premier hub for healthcare real estate due to anchor institutions like Johns Hopkins and the University of Maryland Medical Center,” Smelter added.

“Baltimore is experiencing a wave of historic property conversions,” Beck noted. “The historic nature of this building was critical to the VA’s selection of the property, as the administration prefers historic buildings.”

The federal government wants to see historic structures put to use and will give points to applications that include use of historic buildings, Filley explained to Commercial Property Executive.

“Given the steady performance of and demand for quality MOBs, we see aggressive pricing on these assets remaining in place throughout 2017,” he added.