BALTIMORE–The Baltimore Veterans Administration Annex, a 74,000-square-foot medical office fully leased to the Department of Veteran's Affairs, has traded for $12.25 million, or close to $180 per square foot. The deal demonstrates investors' growing interest in healthcare real estate in the Baltimore market due to anchor institutions like Johns Hopkins and the University of Maryland Medical Center, according to John Smelter, a senior director of Marcus & Millichap's Healthcare Real Estate Group, who brokered the deal along with Chris Beck, Robert Filley and Ryan Gonzales.

The deal was marketed nationwide, with the eventual buyer a first time investor not only in the Baltimore area, but also in government occupied properties. For that reason, a bit of education on how the GSA works when a hitch arose with the transaction became necessary. The hitch, namely, was that shortly after Marcus & Millichap began marketing the property, the Veterans Administration decided to expand the premises. But by the time the expansion negotiation was complete, the VA had less than five years remaining on its lease. That became the challenge, according to Gonzales. However, the team convinced the buyer of VA's commitment to the location, he said.

For starters, the 1920s-era building is a historic conversion, which was critical to VA's choice as it prefers historic buildings. Also, the VA Annex augments the clinical, research and administrative programs at the the 137-bed Baltimore VA Medical Center, which is only three blocks away. Finally, the VA has invested upwards of $4 million in building and tenant improvements.

The VA has leased the building since 2010 and after expanding the facility by 6,800 square feet extended its lease by five years.