Last summer real estate owner and developer Michael Harrah did the opposite of what he’s known for in Santa Ana: He sold three office buildings.
Harrah has spent the past decade buying building after building in Santa Ana. He owns about 3 million square feet of office space in the city.
That’s what makes his August sales interesting. The biggest of the three buildings sold was Park Tower, a 10-story building at 200 W. Santa Ana Blvd.
Park Tower is a few blocks away from where Harrah hopes to build One Broadway Plaza, a proposed 37-story tower that city voters signed off on earlier this month.
If built, One Broadway Plaza would be the county’s tallest building.
Officially, Harrah sold the three buildings to Birtcher Anderson Realty LLC for $58 million because the price was right, said Gil Marrero, Harrah’s broker and a vice president at Voit Commercial Brokerage LP.
Harrah wants to use some of the proceeds to build One Broadway Plaza, Marrero said.
David Shammas, a senior associate with Grubb & Ellis Co., has a different take. Harrah could be concerned that One Broadway Plaza, with 600,000 to 800,000 square feet of space, will lure tenants away from his other buildings.
He passed some of that risk on to Birtcher when he sold the buildings, according to Shammas.
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200 W. Santa Ana Blvd.: part of three-building sale by Harrah in August |
Shammas said he heard a rumor that Harrah has his entire Santa Ana portfolio on the market, though he admits that’s nothing more than speculation.
Harrah wasn’t available for comment on this story.
The burly owner and president of Santa Ana-based Caribou Industries Inc. is a magnate for speculation.
Harrah’s decisive electoral victory on April 5,he captured 56% of the vote for his tower,earned him instant credibility, brokers said. It’s got everyone talking.
“Immediately after the vote, we received a dozen calls from companies interested in leasing” space at the tower, Voit’s Marrero said.
The vote came after Harrah won City Council approval for his tower last year, capping about six years of talks with Santa Ana officials.
Brokers said the tower referendum, dubbed Measure A, was the biggest hurdle Harrah had to jump to get his tower built.
He still faces a legal challenge to the project’s environmental impact report, though he can proceed with construction while fighting it.
There are other big obstacles.
Harrah signed a pact with the city to lease half of the tower before starting construction.
And he needs to get financing for the $100 million or so it will cost to build the thing.
The prospects for Harrah aren’t the same as building a tower next to John Wayne Airport.
“I don’t think he’s going to be able to get the law firms down in Newport Beach to come back to Santa Ana,” said Tom Abel, first vice president in the Anaheim office of CB Richard Ellis Group Inc.
But Harrah likely will have to charge airport-area rates of $2.50 to $3 per square foot a month at One Broadway Plaza, Abel said.
Grubb’s Shammas said the figure could top $3.
In Santa Ana, the newest, best space goes for $1.60 to $2.30 per square foot a month.
Harrah’s broker Marrero confirmed a rumor that the developer is in talks with SBC Communications Inc. to take a big chunk of One Broadway Plaza. He declined to give details.
Industry sources said an SBC lease could be 250,000 to 500,000 square feet,possibly enough to meet the city’s 50% threshold and convince a bank to loan Harrah money.
Even if SBC takes 500,000 square feet, Harrah still will have space on his hands. Marrero said the building should have about 600,000 square feet of office space.
Other brokers said the total square footage for lease is more likely to come in at 800,000 to 900,000 square feet for a building that size.
Marrero said construction on the tower should begin in a year’s time, after Harrah does $12 million worth of traffic upgrades required by the city.
One Broadway Plaza should take 18 months to build, he said.
