Generational Medical Office Building for Sale in San Francisco

Thursday, February 14, 2019

HFF, on behalf of the owner, is pleased to exclusively present to qualified investors the opportunity to acquire the fee simple interest in 3838 California, an 82,805-square-foot, institutional-quality medical office building located in the prestigious Presidio Heights neighborhood within the city of San Francisco. The medical office property for sale represents a fortress risk profile and the first institutional, core, medical office building to be offered for sale in San Francisco in over two decades.

3838 California is one of the largest outpatient facilities in the northwest quadrant of the city and is anchored by Sutter Health (Moody’s: Aa3), the dominant healthcare provider serving the San Francisco Bay Area. Sutter has recently signed a significant lease extension and expansion on the 8th floor and now represents 38 percent of the in-place tenancy with a weighted average lease term of over seven years.

Several value enhancement opportunities exist, including optimizing the parking structure revenue; leasing 13,117 square feet of remaining vacant space; and marking-to-market 12,605 square feet of space expiring during the first 16 months of ownership with rents approximately 36 percent below market, to list a few. The medical office building benefits from the unrivaled surrounding demographics and exceptional physical and economic barriers to entry, resulting in what is truly an irreplaceable location.

Medical Office Building for Sale Investment Highlights

  • Generational Opportunity Within the City of San Francisco:  This represents a generational opportunity to acquire one of only seven non-health-system-owned medical office buildings that is more than 50,000 square feet within the City of San Francisco. 3838 California represents the first core-profile MOB to be offered for sale in San Francisco in over two decades. There is a significant discount to replacement cost, estimated to be well in excess of $1,200 per square foot, in a market with substantial barriers to entry.
  • Exceptional Tenancy and Anchored by Sutter Health and Other Prominent Healthcare Providers:  Sutter Health (Moody’s: Aa3), the dominant healthcare provider in the Bay Area, with 50,000 employees and 11 million patient visits per year system-wide, is the anchor tenant at the property and represents 38 percent of the in-place tenancy. Sutter Health offers a variety of departments on site, benefiting from the exceptional demographics and payor mix this location offers. Many of the tenants within the medical office property for sale have affiliations with Sutter Health, further optimizing the referral patterns and synergies between the various practices. There are many other notable tenants in the building, including California Pacific Orthopaedics & Sports Medicine, the Bay Area’s leading orthopaedic practice; California Skin Institute, the largest private dermatology group in the state; San Francisco Ear Nose & Throat (SFENT), which has four offices and treats patients at six hospitals in San Francisco; and Brown & Toland Physicians, a group with more than 2,400 local, board certified physicians.
  • Dynamic World Class Investment Market:  San Francisco is among the most attractive markets to domestic capital and ranked as the No. 5 market in the U.S. to invest in by 2018 AFIRE survey of foreign investors due to its superb accessibility, outstanding amenities, unparalleled intellectual capital and high concentration of industry leading companies. San Francisco’s long-term fundamentals are unmatched, with major international corporations, banks, financial services and venture capital firms establishing offices here in recognition of the Bay Area’s growing concentration of high technology, software and media companies, as well as the world’s leading biotechnology and life sciences companies.
  • Numerous Value Enhancement Opportunities:  An investor has the opportunity to rebrand the asset to give it a stronger identity using signage, install digital tenant directories, activate the front patio area, common area enhancements, cell tower income and numerous other opportunities. A new owner could lease the 13,117 square feet of vacant space in a San Francisco medical office market that currently boasts a 98.1 percent occupancy rate in addition to marking rents to market with 12,605 square feet expiring in the first 16 months that are 36 percent below market. The parking structure at 3838 is well positioned to significantly improve performance by taking advantage of several dynamics in the immediate vicinity.

For more information on this medical office property for sale or other healthcare properties on the market, please contact Evan Kovac, Andrew MilneTrent Jemmett or David Dokko. To view HFF’s current real estate investment listings, please click here to be directed to HFF’s property search page. 

Holliday GP Corp. ("HFF") is a real estate broker licensed with the California Department of Real Estate, License Number 01385740.

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