62.4 F
Laguna Hills
Monday, Mar 18, 2024
-Advertisement-

Olen Properties Buys Dual Airport Towers

Real estate mogul Igor Olenicoff has entered the airport high-rise derby by buying a pair of 13-story office towers in Irvine for more than $100 million.

Like other recent investors, Olenicoff likely is betting that rising occupancy and pending rent increases will justify the premium price.

The deal marks Olenicoff’s first buy of high-rises in the commercial hub near

John Wayne Airport. Newport Beach-based Olen Properties Corp., which he heads, owns other buildings in Irvine, Lake Forest and office towers in Brea.

“This is the first of several high-rises that we intend to buy in the near future,” Olenicoff said in a statement.

Officials with Olen Properties declined to say how much they paid for the buildings at 2601 and 2603 Main St. An investment fund managed by CB Richard Ellis Group Inc. sold the buildings, whose major tenants are FedEx Corp. and a unit of Orange-based Ameriquest Capital Corp.

Olen borrowed $100 million from Greenwich, Conn.-based Greenwich Capital Markets Inc. to buy the buildings. Depending on how much of Olen’s own cash was put up, the sale price could be in the $130 million to $140 million range.

The Business Journal estimates the sale price was $290 to $310 per square foot. That’s not the highest paid recently for an airport tower but reflects rising prices for buildings in the area.

“They were very expensive buildings, more than we have ever paid on a per square foot basis,” said Andrei Olenicoff, vice president of Olen Properties and Igor Olenicoff’s son. “We feel they’re the type of buildings that won’t be built in this area for a long time.”

Sales prices for OC’s premier office buildings shot up last year. Towers started 2004 changing hands at about $200 per square foot.

In fall, Knobbe, Martens, Olson & Bear LLP paid a reported $325 per square foot,the most yet,for its headquarters at MacArthur Boulevard and Main Street.

As with housing, the persistence of low interest rates has helped push up sale prices.

Moreover, office rents are going up, said Bob Smith of CB Richard Ellis’ Newport Beach office. Job growth and limited construction are drivers, he said.

For now, there’s one sizeable office building under construction in the county, which Olen’s putting up in Brea. A few other developers say they are close to starting construction on high-rises, but not in Irvine.

The cost of putting up a building is prohibitive, Smith said. Office developers have to compete for land with builders of apartments and condos, he said, and prices of steel and concrete have shot up.

Some real estate sources say rents for the newest, best office space,now at about $2.28 per square foot per month,need to break $3 to justify construction.

Olen isn’t the only real estate tycoon looking at high-rises in the airport area.

Donald Bren, owner of The Irvine Company, widely was rumored to have bid $100 million or so for Knobbe’s 14-story building.

The law firm exercised a right in its lease to match the highest bid and bought the building instead, possibly to avoid higher rents.

Bren also bid on the 13-story towers bought by Olen, an industry source said.

Sources said Bren’s logic is similar to Olenicoff’s: No one is going to be building high-rises near the airport for some time, and rental rates are moving up despite an area vacancy rate of 11%.

Of course Olen’s acquisition isn’t without its risks. For one, rents may not rise as expected.

And Olen has upped its exposure to the subprime mortgage industry, which lends to borrowers with imperfect credit.

Along with Ameriquest’s Argent as a tenant on Main Street, Olen last year signed an 80,000-square-foot lease with subprime startup Residential Mortgage Assistance Enterprise LLC.

Residential Mortgage is taking a big chunk of a 130,000-square-foot building Olen is building in Brea.

Subprime lenders have boomed along with rising home prices in recent years. But they’re vulnerable to shifts in the housing market and a move away from risky debt by investors.

In any case, Olen’s 130,000-square-foot building at 6 Pointe Drive in Brea was the largest under construction in the county during the fourth quarter, according to CoStar Group Inc. The building should be done late this year.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-