Applied Medical Owns 36% Of All Rancho Santa Margarita Industrial Real Estate Space
By Arrow Santos and Jim Wynne
Applied Medical is a medical device company specializing in innovative new technology and the advancement of minimally invasive surgery. Applied Medical was founded in 1987 by Said Hilal and had only seven employees at first. Now a business powerhouse and real estate empire, the company employs over 5,000 people across the globe. Headquartered in Rancho Santa Margarita, Applied Medical has purchased dozens of industrial properties across the city over the last few decades. Take a drive around town and you will see their brand-painted industrial buildings all around the business park.
Local business owners often ask us, "How many buildings does Applied own? We see them everywhere!" It's true; Applied Medical has a significant presence in the Rancho Santa Margarita commercial real estate market. Today we will look at the full breakdown of just how much property they have and where those buildings are located. Impressively, Applied Medical owns and operates all its locations – they are their own landlords! Seeing such a large single owner-user as Applied Medical is unusual in our Saddleback Corridor market. This strategy has allowed them to control their growth rate and manage their long-term expenses by putting themselves in control of their occupancy. The results speak for themselves both in the business success of their medical products and in the ever-expanding reach of property ownership.
With 22 properties totaling 1,194,039 square feet in Rancho Santa Margarita, Applied Medical is the city's largest commercial real estate owner. Most of their properties are located along Arroyo Vista and Esperanza in the Rancho Santa Margarita Business Park, a hub for industrial and office space in the area. Applied Medical has strategically purchased properties in the park, allowing them to remain within close proximity to their other campus locations and manufacturing facilities. They also own a couple of properties as investments that they do not occupy. Instead, Applied Medical currently leases these additional industrial buildings to other businesses. This grows their real estate portfolio and provides them with rental income and market control to be used at a later date if needed.
Their buildings range in size from approximately 3,000 square feet to 300,000 square feet, accommodating a variety of uses from manufacturing and research to administrative and distribution functions. Of the 22 properties, the median building size is 23,500sf. Their largest property at 300,000sf is the former Cox Communications building at 29977 Avenida De Las Banderas. This two-story flex building is one of the largest in Rancho Santa Margarita. It sits on approximately 1,000,000sf of surrounding land, mainly vehicle parking and some undeveloped space.
Applied Medical has remained a private company (not traded on public exchanges), and this has undoubtedly played a role in the unique business strategy they have put together. Often, larger companies that are publicly traded do not own their real estate locations (and certainly not all of their sites, even if they purchase a few key locations). This is because a publicly traded company must answer to shareholders and maximize profits around their business function instead of playing a long-term numbers game of commercial real estate investing. Shareholders invest in a company because it has excellent financial returns on medical devices, widgets, or car tires. But Applied Medical has remained autonomous by staying privately owned while also experiencing massive global growth. This unique situation has allowed them to invest in real estate and their business. Because of South Orange County's limited land supply and competitive population growth, Applied Medical has hit the jackpot on power and presence: increasing their revenue, buying the next location, growing into the additional square feet, then replicating that repeatedly. All the while, the property values of Rancho Santa Margarita and surrounding areas have continued to skyrocket.
Not only is their property portfolio impressive as a stand-alone number, it really stands out when compared to the total commercial market in RSM. Applied Medical owns approximately 36% of the total industrial square footage in the entire town! With a total market size of 3,334,669sf, Applied owns approximately 1,194,039sf. They are estimated to have paid over $170,000,000 for their complete portfolio. These purchases occurred over many decades, and the current market value of their space is astronomically more than that valuation with the current market pricing. The average per square foot price they paid overall is estimated at $149/sf. The most recent RSM industrial sale comp pushed $500 per square foot! This is slightly skewed as larger properties will have lower per square foot pricing, so the actual square foot price for most of their larger buildings would be under $500/sf – but also certainly much higher than $149/sf!
Aside from their locations worldwide, Applied also owns other local buildings as they have also expanded into Lake Forest and Irvine. With several buildings on Toledo Way and Windrow Drive, they add another nearly 600,000sf to their South Orange County industrial footprint.
Overall, Applied Medical's extensive real estate portfolio in Rancho Santa Margarita is a testament to its success and commitment to innovation in all aspects of its business. It will be of interest to everyone in the business community to see what Applied plans for the future and how that may affect the commercial real estate values and availability in Rancho Santa Margarita in the years ahead.
Jim Wynne, a San Clemente local, San Onofre Surfing Club president, and father of five, serves as chairman for the San Clemente Chamber of Commerce. As president of WynneCRE, he has shown his dedication to helping small businesses with their real estate needs and protecting San Clemente’s small-town interests through active community participation and reporting on business news topics.
Arrow Santos is a San Clemente native, professional writer/photographer, Reese’s Peanut Butter Cup enthusiast, and follower of Jesus. As marketing director of WynneCRE, he has shown his dedication to helping small businesses with their commercial real estate needs and protecting San Clemente’s small-town interests through active community participation and reporting on business news topics. Email Arrow at arrow@wynnecre.com.