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OC Lesson Plan: Colleges Are Buying in Spectrum

Office parks in the Irvine Spectrum have become the go-to location for back-to-school sales of a real estate variety over the past few years.

Orange County universities have spent nearly $100 million since 2009 buying and renovating offices in the Spectrum, using the buildings as auxiliary campuses, administrative offices, and in some cases, sources of rental income.

The schools’ purchases in the area, taken as a whole, would make them the second-largest investor in Spectrum-area office properties over that time, trailing only Newport Beach-based Irvine Company.

The latest addition to the buyers’ club: California State University, Fullerton, which this month closed on the $30.5 million purchase of the two-building Banting Corporate Center in Irvine.

The school had been leasing a portion of the offices at the center since 2011 for a branch campus.

Cal State Fullerton will continue to occupy one of the buildings at the 140,000-square-foot center, and it will expand into the other building as existing tenants’ leases expire over the next five years.

The Irvine purchase “reconfirms our commitment to South Orange County,” Cal State Fullerton President Mildred García said in a statement.

The school has operated a separate campus since 1989 to serve students living or working in Central and South OC.

The buildings purchase is part of a trend of local nonprofit schools looking to own instead of rent facilities, said Jeff Woolf, a senior vice president for the Los Angeles office of CBRE Group Inc. who heads the brokerage’s Private Sector Colleges & Universities Education Practice Group.

“They want to control their own destiny,” Woolf said. “If they’ve got the money, they will spend it.”

CSUF financed the Banting Corporate Center buy with systemwide bonds. The school said it expects to pay off the debt with rental income from tenants in the buildings.

Chapman University in Orange is another large school that has been shopping in the Spectrum lately.

It paid a reported $20 million last September to buy Jeronimo Technology Park, a two-building office park in the Spectrum at the intersection of Alton Parkway and Jeronimo Road.

The school is converting the buildings, which total about 166,000 square feet, into a campus for its new graduate health sciences program and expects to spend about $24 million in renovations before the buildings open next year.

It will rename Jeronimo Technology Park to Chapman University Health Sciences Campus, which will house classrooms, offices and lab space for graduate students enrolled in physical therapy courses at the Crean School of Health and Life Sciences at Chapman’s Schmid College of Science and Technology.

The purchase came about three years after Chapman bought another Spectrum building on Laguna Canyon Road for close to $20 million.

The 115,000-square-foot office is occupied by Chapman’s sister institution, Brandman University, which serves adult learners.

Expansion

Chapman’s real estate eye looks beyond the Spectrum.

A growth plan it approved nearly 20 years ago led it to snap up a variety of homes, offices and other buildings in the blocks surrounding its main campus in Orange.

It’s a strategy similar to one another private school, the University of Southern California, has undertaken around its main campus in Los Angeles, Woolf noted.

USC “owns everything nearby (its campus). They both want to expand their home base,” he said.

Chapman reportedly owns nearly 90 acres of property altogether in and around its main campus. Its recent deals included some unconventional purchases.

In June, it closed on the purchase of the Quality Suites Anaheim Stadium, a 104-room hotel in Orange just off the Santa Ana (I-5) Freeway.

It’s converting the 3101 W. Chapman Ave. property into student housing and renamed the hotel Panther Village. It plans to open the complex to about 240 students in the fall.

A price for the hotel, which sits about 2.5 miles from the school’s main campus and about half a mile from the Outlets at Orange shopping center, wasn’t disclosed. CoStar Group Inc. records show the property’s assessed value last year at about $9.2 million.

In 2011, Chapman also took a stab at buying the Crystal Cathedral complex in Garden Grove, which it planned to develop as its health sciences campus, but Orange County’s Catholic archdiocese ultimately purchased the property.

Chapman opted to instead set up the health sciences campus in the Spectrum.

For-Profit, Different Focus

Some of the region’s universities have aggressively bought real estate, but others have stuck with renting.

In general, for-profit schools, such as Santa Ana-based Corinthian Colleges Inc., “don’t like to own,” CBRE’s Woolf said. Much of that comes down to government regulations that effectively penalize real estate ownership for those schools when calculating the amount of federal assistance their students can receive.

For-profits “shun ownership,” Woolf said.

That pattern plays out in the case of Corinthian Colleges, one of the country’s largest for-profit, post-secondary education companies in the U.S. and Canada.

The total square footage of Corinthian’s properties was approximately 5.5 million square feet last year.

The school leases all but four of its facilities, including its headquarters at the Griffin Towers office complex. Most of the leases have primary terms of between five and 10 years, according to regulatory filings.

In 2009, Corinthian made a deal with Chicago-based brokerage Jones Lang LaSalle to handle its tenant representation, project management, facility management and lease administration services.

Last year, Corinthian completed sale-leaseback transactions for campuses it picked up through the 2010 acquisition of San Francisco-based competitor Heald College. The move raised nearly $40 million.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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