An Edison International unit is moving its headquarters from Irvine to Santa Ana in one of the larger office relocations Orange County’s seen of late.
Edison Mission Energy, an owner and operator of power plants, recently signed a deal to move to 3 MacArthur Place, a 246,819-square-foot tower at MacArthur Boulevard and the Costa Mesa (55) Freeway.
The lease is for 85,339 square feet, or about three floors of the 11-story building. The lease runs 10 years and starts in 2011.
Edison Mission, a unit of Rosemead-based Edison International that got its start in the 1980s, now is in Irvine’s Lakeshore Towers office complex near John Wayne Airport.
Its 90,000-square-foot lease in Irvine expires at the end of the year.
The Santa Ana deal is believed to be the second largest office lease signed in the county this year, not including renewals, according to El Segundo-based Highridge Partners, landlord of the Santa Ana building.
Irvine’s Sage Software Inc. is the largest local company to announce a relocation this year after signing a 91,000-square-foot lease for space in the Irvine Spectrum a few months back.
The Edison Mission lease also is the first big deal signed by Highridge since it paid $31 million for the 246,819-square-foot building in late 2009.
Highridge bought the building for $52 million less than what it traded hands for in 2007.
The building also holds a unit of Deutsche Telekom AG’s T-Mobile USA Inc., which just signed a seven-year renewal for 20,377 square feet of space. That’s about half of what the company had been taking up at the building.
Occupancy
The two leases bring 3 MacArthur to about 85% full. Without the deals, the building would be roughly half full at the end of this year with other expiring leases.
“We’re on track with (our) leasing, in terms of time,” said Jack Mahoney, executive vice president of Highridge. “But the market’s still a little soft. (Tenants) have a lot of choices.”
The airport area has a 24% direct vacancy rate, making it the 29th worst market of the 31 largest U.S. business districts, according to brokerage Cushman & Wakefield Inc.
The empty space seen at offices around the airport “is creating some of the most value-driven lease opportunities we’ve seen in years,” said Eric Hinkelman, senior managing director with Cushman & Wakefield’s Irvine office, in a recent market report.
Terms of Edison Mission’s lease weren’t disclosed. Highridge is marketing space at the building at monthly rents of about $2.45 per square foot, according to market tracker CoStar Group Inc.
Brokers not involved in the lease said the deal likely was signed at closer to $2 per square foot, if not lower.
Highridge likely can afford to offer monthly rates below some competition, after picking up the Santa Ana office at what appears to be the recent low of OC’s office market in terms of sales prices.
The investor bought the building from a unit of New York-based Tishman Speyer Properties LP last October.
The price was $31 million, or about $125 per square foot. Tishman paid about $83 million for MacArthur Place near the peak of the market in mid-2007.
Highridge since has put another $1 million or so into the —its only OC office building—according to Mahoney.
“We’re focused on what I’d call ‘intensive care’ work,” he said. “We buy (buildings) that are a little broken, stabilize them and try to fill them up.”
The company typically holds a building for five to seven years. Highridge has been looking at other local deals but so far hasn’t seen any buildings that fit the bill, according to Mahoney.
“There’s so much pent-up demand,” he said. “Banks are releasing (offices) slowly. It’s hard from the perspective of a value-add investor.”
In late July, Highridge paid $42 million for an office building in San Francisco’s financial district.
Edison Mission has been in Irvine for more than a decade.
The company got its start in the days of deregulation, investing in power plants across the globe. These days, the company is focused on the U.S., selling power through contracts with large utilities, regional distributors and other energy companies.
Edison Mission owns and leases 45 gas and coal power plants across the country.
The Irvine operations include Edison Mission’s executive offices and other operations.
The company currently leases 90,000 square feet at Lakeshore Towers, according to a filing with the Securities and Exchange Commission.
During its peak in past decade, Edison Mission leased close to 150,000 square feet in Irvine.
Other Edison Space
Parent company Edison International, which owns energy utility Southern California Edison, also has space at Lakeshore Towers, as does another unit it owns, energy investment arm Edison Capital.
Edison International is not moving to Santa Ana, but Edison Capital is.
Al Masters and Michael Streff, from the Newport Beach office of brokerage RealTech, represented Edison Mission in the Santa Ana lease. Andrew White, Dean Chandler and Mark Friend, from the Newport Beach and Anaheim offices of CB Richard Ellis Group Inc., represented Highridge.