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LA Investor Gets Most of Airport-Area Office Campus

The bulk of a 24-building low-rise office campus on Von Karman Avenue in Newport Beach has been sold to a Los Angeles-based real estate investor that’s evaluating development prospects at the nearly 20-acre site.

Kearny Real Estate Co. acquired Newport Corporate Plaza, an office campus a few blocks from John Wayne Airport along the Newport Beach-Irvine city line.

Terms of the off-market deal, made with a consortium of prior building owners at the office campus, were not disclosed.

Real estate sources place the deal’s value at a little more than $40 million.

Privately held Kearny partnered with Boston-based AEW Capital Management LP to buy the property.

The deal involved 17 buildings at the office park, which runs about 250,000 square feet. The campus is bounded by Von Karman Avenue, Birch Street, Teller Avenue and Campus Drive.

Kearny and AEW bought the fee titles to five buildings at the site, as well as ground leases tied to an additional 12 offices there.

Seven buildings remain individually owned and were not included in the sale.

First in Awhile

It’s the first big Orange County investment for Kearny in several years. The privately held company, which primarily invests in office and industrial properties, has managed and developed more than 200 assets across California worth about $4.4 billion.

The lack of recent local acquisition activity isn’t for lack of trying, according to Kearny Partner Hoonie Kang.

“It’s a coincidence that we haven’t bought more,” Kang said. “We’ve been making lots of bids.”

The project’s Newport Beach address, its proximity to the airport, and the potential for redevelopment attracted the company to the site, Kang said.

The company is considering a variety of options for the property.

Creating a new master plan for the campus that focuses on residential development is a possibility and would probably represent the highest and best use for the site. That plan would first require getting the owners of the other seven buildings to agree on a deal.

Other individual owners at the campus include apartment developer and owner Lyon Communities, which has its headquarters at 4901 Birch St.

There are two other big residential developments in the works within a few blocks of Newport Corporate Plaza.

Irvine-based Shopoff Realty Investments is in the early stages of development work for its 1,244-unit Uptown Newport project along Jamboree Road. And on the Irvine side of Campus Drive, where older offices and industrial buildings stand, Garden Communities of California is planning a 1,600-unit apartment complex.

Newport Corporate Plaza was built in two phases in 1978 by The Koll Co. The site was rezoned in 2006 to allow for residential, office, hotel and retail uses, according to Kearny officials.

User Sales?

Other possibilities for Kearny at Newport Corporate Plaza include renovating individual buildings at the campus—which range from 7,300 to 14,450 square feet—and selling them to owner-users.

The lack of available for-sale offices of that size bodes well for that break-apart strategy, according to Anthony DeLorenzo, vice president for the Newport Beach office of CBRE Group Inc.

“We’ve been seeing pricing increases (for owner-users) over the last 18 months, especially in Newport Beach,” said DeLorenzo, who worked on the sale with colleagues Gary Stache, Pat Scruggs and Doug Mack, along with Don Nourse of Lee and Associates Commercial Real Estate Services.

Besides the Newport Center buildings that surround Fashion Island, the buildings on Von Karman Avenue represent Newport Beach’s most prominent office market, according to Stache.

Other options include holding the property long term and capturing value through rent appreciation and upcoming rent resets on the site’s ground leases, according to Kearny executives.

“It provides a great income stream,” Kang said.

Collectively, the 17 buildings, which total about 172,000 square feet, were 80% leased at the time of their sale.

“This is exactly the sort of investment we look for, as it provides us with a variety of options,” said Kearny Managing Partner Jeffrey Dritley.

Other big Southern California office redevelopment projects for Kearny include a 42-acre site in Carson formerly used by Nissan North America. The property was turned into a multitenant campus in 2007.

In 2005, the company converted an aerospace manufacturing plant in Hawthorne into an 86-acre masterplanned business park known as Century Business Center.

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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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