PHOENIX—Cypress West Partners, a Southern California-based healthcare investment, leasing and property management firm, has acquired two high-profile medical office buildings in Scottsdale in a joint venture with MedProperties Holdings LLC, a national, healthcare-focused real estate private equity firm headquartered in Dallas.
The two acquisitions include: Scottsdale at Mescal, a 48,457-square-foot courtyard garden-style MOB complex, built in 1985, comprised of six buildings. The complex, located 10900 N. Scottsdale Rd., is anchored by Honor Health (formerly, Scottsdale Health); and Shea Corporate Medical Plaza, a two-story, 23,081-square-foot MOB, built in 1991, which houses a variety of medical and dental practices. Located at 7032-7054 E. Cochise Rd., the facility features covered parking, courtyards and fountains.
Based on a 75.5% percent occupancy rate of the properties, the two firms recognized substantial upside in the acquisition.
Chris Cumella, partner, Cypress West Partners, tells GlobeSt.com: “Arizona is an important market for us. We have three MOBs in Phoenix, one in Glendale, one in Yuma and now two in Scottsdale. During the recession, certain areas were hit very hard—particularly housing. But we've always been bullish on Arizona due to its strong working class, affordability, snowbirds and retirees. It's a strong market.
“The properties are located within Scottsdale's Cure Corridor, which has a high concentration of businesses involved in the medical and life sciences sectors. The Cure Corridor has been a major driver for Scottsdale and the greater Phoenix economy. The sites also benefit from proximity to Honor Health Scottsdale Shea Medical Center,” continues Cumella. “Based on their superior location, we are confident that our team will be able to increase occupancy and positively impact property value.”
Cumella notes that the firm is investing significantly in a refresh of the properties' exterior including updating common areas, landscaping and the overall look of the property. “We've got a capital budget of over $1 million so we are going to modernize these spaces and bring our buildings to the forefront and dig in deep as an operator.”
An even greater opportunity for both firms was to enter into a joint venture for the acquisition. MedProperties Holdings LLC had been seeking to expand both its existing investment presence, and also its joint venture partner relationships, in the Western United States. This transaction marks MedProperties and Cypress West's first joint venture, with plans to do more.
Darryl E. Freling, managing principal, MedProperties says, ”We met Cypress West's leadership team about two years ago and were impressed with their intelligence, capabilities and market savvy. We have been interested in working with them as an operating partner ever since. “
“MedProperties is one of the premier private equity firms in the healthcare real estate space, making them a strategic partner for us. This collaboration leverages both firms' strengths. That's why we look forward to partnering with them again,” says Jeffrey Johnson, partner, Cypress West.
The Scottsdale and greater Phoenix market has been a target for the firms due to its strong economy that boasts a 5.9 percent unemployment rate. Specifically, DTZ recently reported that several health care providers and insurers boosted their Arizona employment at double-digit rates.
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