USC has added a medical office building to its immense real estate portfolio, purchasing the roughly 151,000-square-foot site on the USC Health Sciences Campus where it had leased space from owner Doheny Eye Institute, a nonprofit affiliated with rival UCLA.
The price was just over $110 million, or more than $730 a square foot, according to a source familiar with the deal.
Laurie Michelle Stone, USC’s associate senior vice president for real estate, said the university targeted the property because it is the building’s sole tenant for both clinical practice and research.
“That, in conjunction with the building’s location in the center of our USC Health Sciences Campus, made this an important acquisition for the university,” she said via email.
Doheny was affiliated with USC for four decades until 2012, when the university ended the relationship. Doheny signed a 99-year agreement the following year tying it to UCLA.
Doheny’s executive director, Marissa Goldberg, said the new partnership was part of the institute’s motivation to sell.
“Since our academic affiliation now lies with UCLA Stein Eye Institute, it makes sense to divest ourselves of this property as part of our larger strategic realignment with our affiliation partner,” she said via email.
The sale comes as the medical office market is a hot target in Los Angeles. The sector’s vacancy rate has been falling since 2012 and hit 7.3 percent last quarter, according to Marcus & Millichap. That figure represents half the traditional office vacancy rate of Los Angeles County in the same period.
The Doheny building was marketed by Charles Dunn Co. and Kennedy Wilson Inc. and attracted bids for as much as $125 million, or about $830 a square foot, according to sources familiar with the transaction. Investor interest was particularly strong because USC has a lease for the building, constructed by Doheny in 1976 with a major expansion in the mid-’90s, for an additional two decades.
Christopher Conway, Doheny’s chief of development and public affairs, said the deal resolved legal disputes between the two parties. Doheny sued USC in June, alleging the university was using Doheny’s clinical equipment and furniture without permission and had breached a lease contract.
“The outstanding issues were folded into the deal,” he said. “Doheny was very pleased with the outcome.”
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