LaSalle Investment Management Takes Two Medical Office Buildings for $148M

Kilroy Realty Corp. has unloaded $147.5 million of property -- in the form of two medical-office buildings -- to LaSalle Investment Management. The two Class A buildings, which total 253,676 square feet, are located in San Diego.

February 21, 2012
By Nicholas Ziegler, News Editor

15004 Innovation Drive in Rancho Bernando

Kilroy Realty Corp. has unloaded $147.5 million of property — in the form of two medical-office buildings — to LaSalle Investment Management. The two Class A buildings, which total 253,676 square feet, are located in San Diego. Holliday Fenoglio Fowler L.P. represented the seller.

The properties are located at 15004 Innovation Drive in Rancho Bernardo and 10243 Genetic Center Drive in San Diego. Completed in 2008, 15004 Innovation Drive is a six-story, 150,801-square-foot building that is fully leased to Scripps Health for 15 years. 10243 Genetic Center Drive, a three-story, 102,875-square-foot property, is fully leased to Sharp Healthcare for 20 years and offers the potential to expand by up to 48,300 square feet. Both lease terms include annual rent increases of three percent.

According to a recent report by Marcus & Millichap Real Estate Investment Services Inc., the medical-office market is poised to have a good 2012. Two trends — the growing economy in general and the 2.2 percent increase in healthcare employment specifically — continued to drive demand for the asset class through 2011. There is significant room for growth, as well, with the report noting that “at 11.5 percent, medical office vacancy has retreated 70 basis points from its late-2009 peak, though it remains almost 140 points above pre-recession levels.”

In a transaction that closed on Jan. 31, 2012, Kilroy had a very similar experience, selling three healthcare-related properties in San Diego for $146.1 million. One of the properties in that transaction, located at 15004 Innovation Drive, is also fully leased to Scripps.