Lakewood Ranch attracts institutional investor

LAKEWOOD RANCH — As Realtor Steve Horn stands in front of Lakewood Ranch Medical Office Building I, visitors scurry in and out for various doctor’s appointments.

Everything appears to be business as usual.

Behind the scenes, however, it’s far from the case. Some of Bradenton’s most prominent businessmen have sold the property to institutional investor Grubb & Ellis Healthcare REIT II. The real estate investment trust purchased the 57,563-square foot complex, which is attached to the south end of the Lakewood Ranch Medical Center, for $12.5 million — or about $217 per square foot.

Horn, who represented the sellers for the deal on behalf of Ian Black Real Estate, said it’s the largest transaction he’s completed in Lakewood Ranch.

“It’s a sale that didn’t represent a 50-cent-on-the-dollar sale,” he said. “It was a market sale that had equity in it.”

The transaction, he said, also indicates the Lakewood Ranch community is gaining the confidence of internationally renowned investment companies such as Grubb & Ellis Co., one of the largest commercial real estate services and investment companies in the world.

“We had to get Grubb & Ellis convinced that Lakewood Ranch was a good place to invest long term,” Horn said. “The long-term viability of this building is directly related to the long-term viability of Lakewood Ranch.”
Grubb & Ellis’ Healthcare REIT II currently is seeking to raise up to $3 billion in equity and to acquire a diversified portfolio of real estate assets, focusing primarily on medical office buildings and other healthcare-related facilities. The trust closed on MOB I on April 15, and this month also acquired a nursing facility in Yuma, Ariz., and a medical building in San Antonio.

“The acquisition of these properties was attractive to Grubb & Ellis Healthcare REIT II due to their proximity to well-managed medical centers and their financial performance,” said Danny Prosky, president and chief operating officer of the REIT.

Prosky said MOB I fit all the REIT’s criteria: solid financials, good tenants and a building attached to a thriving medical center.

“For us, that’s a home run,” he said.

Former Senate President John McKay, who developed MOB I with Gary Huggins and general contractor Ron Allen of NDC Construction, said MOB I developers have had several offers, contracts and letters of intent submitted on the property since it was developed in 2003 — primarily from institutional investors — but none yielded a sale of the building. The deal with Grubb & Ellis, however, proved different.

“We thought it would be in the best interest of the partners to go ahead and sell,” McKay said. “We’re happy to sell it, although we do have some seller’s remorse because it’s such a good asset.”

At the time of purchase, the building was 97.6% leased. Of the five leases in MOB I that came up for renewal in 2010, all five renewed at about the same rent structure, and even agreed to a longer lease, Horn said.

“That gave Grubb & Ellis confidence (this was a good investment),” he said, noting Grubb & Ellis’ interviews with building tenants confirmed their satisfaction with the building and its operations, as well.

Rex Jensen, president and CEO of Lakewood Ranch developer Schroeder-Manatee Ranch, said overall vacancy rates in Lakewood Ranch are about half the Sarasota-Bradenton area at about 11%. The only close comparison is downtown Sarasota at about 12%, Jensen said.

“It’s just simply indicative of the (fact) the Ranch has assets that even in a bad market can fetch a good price,” Jensen said of the sale. “If you look at having a medical office building somewhere else, there’s no way it would fetch that price.”

Horn said the deal with Grubb & Ellis took two-and-one-half years. The company had considered acquiring the property for its Healthcare REIT I, but the timing did not work out. Serious discussions with REIT II started about seven months ago, he said.

Under new ownership, Medical Office Building I will continue under the management of Riverside Real Estate, a management company owned by McKay and Allen. Horn will continue to lease units on behalf of Grubb & Ellis, he said.

Contact Pam Eubanks at [email protected].

Property Appeal

Ian Black Real Estate Realtor Steve Horn said some of the draws for the property were the stability of its tenants and its connection to the Lakewood Ranch Medical Center.

“That’s the crème de la crème,” Horn said of medical office space attached to a hospital. “That’s what institutional buyers want. Not all the tenants need that back and forth, but most of them do. It’s a matter of convenience.”