Meridian Buys Tucson MOB
Meridian has acquired a 94,569-square-foot medical office building in Tucson, Ariz., from an affiliate of Tenet Health. The property is slated to undergo a capital improvement program which will begin this month, with completion expected in early 2026. El Rio Health will fully occupy the facility.
Cushman & Wakefield | PICOR represented Meridian on the purchase and El Rio Health on the lease. Transwestern negotiated on behalf of the seller.
El Rio Health has served the Tucson community for more than 50 years and currently operates 14 clinics providing medical assistance to roughly 10 percent of the city’s population, according to prepared remarks by Meridian CEO Mike Conn.
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At the new location, the health-care company will provide primary medical, behavioral and dental health care, pharmacy, as well as radiology, specialized care and support services, Clinton Kuntz, CEO of El Rio Health, said in a prepared statement.
Meridian plans to decommission outdated equipment, including a central utility plant that has not been functional in years, and install new systems such as HVAC units, boilers and fire-prevention equipment. New landscaping features and parking arrangements will also be implemented.
Located at 4888 N. Stone Ave. on more than 9 acres, the facility is roughly 5 miles north of the city center, with a plethora of retail options within walking distance. The Central Tucson property will alleviate El Rio Health’s capacity stress at its clinic on Prince Road, which is roughly 3 miles away, Kuntz added.
Cushman & Wakefield | PICOR Principal Rick Kleiner represented Meridian in the acquisition and El Rio Health in the leasing negotiations. Transwestern Senior Vice Presidents Vince Femiano and Kate Morris assisted Tenet Health.
Meridian’s medical office renovation efforts
Since its inception in 1999, Meridian has delivered healthcare and general office projects including more than 15 campuses and upward of 150 facilities. However, in addition to ground-up developments, the company also invests in, renovates and repurposes existing buildings.
Another one of its previous renovation projects also took place in Tucson. The El Dorado Medical Plaza—a 187,690-square-foot former hospital—underwent substantial capital improvements in 2021. Meridian acquired it from Clarion Partners and implemented a series of upgrades pertaining to the cooling towers, mechanical equipment, sewerage and security systems, among others.
Meridian operates outside of Arizona as well. In 2021, the firm paid $81.5 million to purchase a 67,510-square-foot medical office building in Beverly Hills, Calif., from Iris Capital Group. Following the acquisition, Meridian gave the facility’s common areas a facelift and implemented modest changes in the property’s operational systems.
Medical office thrives in Tucson
Tucson’s medical office market has strong fundamentals, with high demand and limited supply of high-quality product, according to a second-quarter report by Cushman & Wakefield | PICOR. Prices have increased due to an inventory scarcity and rising construction costs, contrasting the discounted costs of larger office buildings.
Central Tucson has consistently been a hot spot for the market, alongside Northwest Tucson and the Foothills. These submarkets saw strong demand for freestanding medical buildings and smaller offices averaging 2,500 square feet.
In addition, medical practitioners who seek to expand or open new offices are willing to undertake conversions and redevelopment projects, as well as agree to longer lease terms with landlords, the report points out.
Earlier this year, a joint venture between Altera Fund Advisors and Virtus Real Estate Capital made a $43.2 million medical office investment in Tucson. The duo bought four facilities with the help of a $32 million loan issued by Capital One.
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