Hoag’s newest addition: rendering of entrance at outpatient center Hoag Memorial Hospital Presbyterian plans a major expansion of its operations in Irvine after inking a lease for a new medical office complex that will be built along Sand Canyon Avenue.

The Newport Beach-based operator of hospitals, urgent and other healthcare centers said last week it has agreed to lease the bulk of Shady Creek Medical Center, a 157,200-square-foot project to be built at Alton Parkway and Sand Canyon Avenue. The project, across the street from Hoag Hospital Irvine and the Kaiser Permanente Irvine Medical Center, is expected to open in late 2015.


Early stage ground work for the development—which will be called the Hoag Health Center Irvine—is expected to ramp up next year. The project is one of the largest medical office projects to be built in Orange County in several years. A conservative estimate would put a price for it at around $50 million.

The project—headed up by San Diego-based Pacific Medical Buildings LLC—calls for three two-story buildings of 50,000 square feet each. Hoag will occupy all three buildings under a long-term lease. It plans to use the space for outpatient services, and the facility should complement the 176-room Hoag Hospital Irvine, which opened three years ago, said Sanford Smith, senior vice president of real estate and facilities for Hoag.

It is the largest new project for Hoag currently in the works, said Smith, and is expected to be similar to its Hoag Health Center-Newport Beach, an outpatient treatment center about half a mile from its main hospital in that city, according to Smith. Hoag’s facilities in Orange County now total about 2 million square feet.

It’s becoming increasingly common for healthcare systems to pool more of their outpatient services at locations outside their hospitals to improve efficiencies and for cost savings, said Garth Hogan, executive managing director for Newmark Grubb Knight Frank’s global healthcare services office in Newport Beach.

“It’s an active strategy across the country for the healthiest operators,” said Hogan, who along with Newmark colleague John Scruggs represented Pacific Medical in the lease.

“They’re starting to mobilize, to prepare for more customers” amid the rollout of healthcare reform measures under the Patient Protection and Affordable Care Act, Hogan said.

Kevin Leonard, with the Newport Beach office of HealthWest Realty Advisors, represented Hoag in the lease. Terms of Hoag’s lease with Pacific Medical were not disclosed. Space at the project had been offered at monthly rents of $3.25 per square foot, according to brokerage data. Hoag would pay a little more than $5.8 million annually in rent at that rate.
The lease puts the development of Shady Creek Medical Center on the fast track after a few false starts.

Pacific Medical took over the project, which sits on about 40 acres of land, a couple years ago from another developer that was unable to kick off construction due to the effects of the last recession.

“It’s seen a few iterations,” said Jake Rohe, vice president of development for Pacific Medical.

Other local projects Pacific Medical has worked on include developments in Mission Viejo and Orange. The Irvine project, according to Rohe, will be “one of our largest” in OC. The Irvine office of Boulder Associates is expected to handle architecture plans for the project, according to Rohe.

Rosemead-based Edison International’s Southern California Edison owns the land for the upcoming project site and signed a long-term ground lease with Pacific Medical. The power company is responsible for the first batch of construction on the land, which will involve moving existing power lines underground.

The development includes a 7,200-square-foot retail building—likely to house restaurants or a coffee shop—along with the three buildings to be leased by Hoag.
Leasing is still under way for the retail space.

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