Santa Monica Lookout
Location and Design of Santa Monica Medical Building Behind Record Sale Price
By Jason Islas
September 13, 2013 -- The $55 million sale of a small medical office building in Santa Monica reveals the power of zoning regulations, location and design in the real estate market, according to local realtors and officials.
All those factors contributed to the record-setting price tag paid by Montecito Medical Investment Co. when it bought the three-story UCLA Outpatient Surgery and Oncology Center building at 1223 16th Street, across the street from the UCLA Medical Center in Santa Monica.
“It speaks to not just the value of land in Santa Monica but the value of a facility like UCLA's hospital,” said Mayor Pam O'Connor. “They are a huge community asset.”
She said that the high price, which real estate experts are saying could be the highest paid for a building of this type outside of New York, is also likely a result of the building's design by local architect Michael Folonis.
Folonis' building earned LEED Gold certification, one of the highest energy efficiency ratings offered by the U.S. Green Building Council, for its environmentally friendly features.
A promotional video on Montecito's website boasts the building's ability to harness the sun's energy to provide for roughly 15 percent of the building's energy needs.
Santa Monica has identified medical buildings as one of the highest intensity land uses because of the amount of water and electricity they require. The City also has stringent parking requirements for such facilities, which are one of the highest generators of traffic.
“The parking requirements are exceedingly high” which makes building medical facilities expensive, said local realtor Joseph Fitzsimons
Montecito's video points out that the building is designed with a state-of-the-art solution to the parking problem: one of the only fully-automated valet parking systems on the west coast. The system can fit nearly 400 cars into a space half the size of a conventional parking lot, the video says.
The high level of technology integrated into the building's design is likely another factor in its high price.
“You aren't sandwiching in new technology in a building that was built in a different era,” O'Connor said.
O'Connor speculated that was likely a major selling point when Montecito decided to buy the building.
The cliché that location is everything is perhaps truer for buildings that offer services like the UCLA Outpatient Surgery and Oncology Center than any other form of real estate.
“They need to be close to the hospitals,” O'Connor said. Within in the building, doctors provide special medical procedures and outpatient surgery to patients.
But the supply of hospital-adjacent real estate is low, which means its value is high.
“Medical space is hard to find here,” Fitzsimons said, adding that it's not just an issue in Santa Monica. Beverly Hills is struggling to find adequate space for hospitals and their attendant buildings, too.
With the UCLA Medical Center and Saint John's Health Center, Santa Monica has two major hospitals in its 8.3 square miles.
And that's a good thing, O'Connor said.
“We are incredibly lucky to have UCLA and St. John's,” she said. “Should we not have a hospital?”
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