“Having a visible outpatient facility that also provides easy access, and convenience for patients and staff has been a growing trend for systems and healthcare providers. Patients often have difficulty navigating the large and often confusing hospital campuses, entrances and large parking garages,” says Meridian's CEO John Pollock. “It is all about the patient experience. Meridian has seen this trend over the past few years, given the cost advantage and convenience factor of providing services in an outpatient setting as opposed to a higher acuity, higher cost hospital.”

An example of this type of location-sensitive asset is a 12,754-square-foot dialysis clinic in Oakland. Meridian sold the building for $15.7 million, representing a price of $1,230-plus-per-square-foot or a cap rate of 5.1%. The buyer was a Fremont-based family office in a 1031 exchange that was looking to invest in an iconic location with access to the healthcare market.

The outpatient clinic is located at 4242 Broadway in the North Oakland neighborhood in a busy corridor near Kaiser Permanente and Sutter hospitals on Pill Hill. The site is also positioned within proximity to the MacArthur BART station, Interstate 580 freeway and Highway 24, and is adjacent to a variety of retail services.

In 2013, Meridian acquired four lots to create a 19,600-square-foot parcel for ground-up construction of the new outpatient healthcare clinic.

“Given that this requirement was in an extremely tight urban in-fill market, paired with the attractive Oakland market in recent years, this was a difficult type of site to locate,” says Meridian's senior vice president Mike Conn. “With a little flexibility regarding development style, we were able to deliver a desirable building in a perfect location. Through a coordinated team effort with our client, vendors and the city, we were able to construct the OSHPD 3 clinic in just under 10 months.”

The clinic was completed a year ago, in September 2017.

“Over the past 10 years, we have forged a relationship with the tenant and working together, we were able to secure a site well in advance of the requirement,” Pollock tells GlobeSt.com. “This allowed us to be selective and find just the right location. With Meridian's capital structure and the tenant's commitment to the location, we were able to hold the property for several years before commencing construction. The ability to land-bank it for the tenant ended up in our favor with the dramatic increase in prices between 2013 and 2017 in Oakland.”

The site required Meridian to vacate and demolish three different buildings while maintaining the structural integrity of a large retaining wall built into the rear of the buildings.

“The development in Oakland was one of the more difficult projects that Meridian had undertaken from a logistics perspective. Developing a 12,754-square-foot outpatient clinic on a parcel that was less than 20,000 square feet, providing adequate on-grade parking and a single floorplate that would accommodate a dialysis treatment floor was no easy task,” Pollock tells GlobeSt.com. “With thoughtful planning, Meridian was able to assemble the same team that delivered a similar project in the tight urban in-fill market of San Rafael. HKA was our architect, Kier & Wright was our civil engineer and Stevens-Hemingway-Stevens was our general contractor. We also had numerous key subcontractors.”

Chris Sheldon of Cushman and Wakefield, based in the firm's San Francisco office, represented Meridian in the transaction. The buyer was represented by Bay Area-based The Kase Group.

Since its inception in 1999, Meridian has developed more than 15 dialysis clinics. This is Meridian's fifth transaction in 2018, having acquired four new buildings earlier this year, on the heels of Meridian's June 2018 sale of its 104,000-square-foot general office building located at 1000 Marina Blvd. in Brisbane, CA. That purchase price was $39.5 million.