Menlo Equities LLC has added four more offices to its already sizable holdings in Foothill Ranch and Lake Forest, in a pair of acquisitions valued at more than $60 million.
In the larger of the two deals, the Palo Alto-based real estate investor this month completed the purchase of a 288,348-square-foot office campus on Towne Centre Drive in Foothill Ranch.
The three-building property, which runs alongside the Foothill (241) Toll Road, goes by the name of Campus South County.
The multitenant buildings are a few blocks from the Foothill Ranch Towne Centre shopping center at the intersection of Towne Centre Drive and Lake Forest Drive.
The center was built in 1999 on 18.4 acres. It got a $1.2 million renovation last year, including a new conference center, tenant lounge and outdoor meeting areas.
The three two-story buildings at the Campus were the first office development built in the masterplanned community of Foothill Ranch, according to CoStar Group Inc. data.
Terms of the sale were not immediately disclosed. Real estate sources familiar with the transaction put an estimated $50 million price, or nearly $175 per square foot, on the buildings.
The offices were sold by New York-based MetLife, which paid a reported $43.2 million for them in 2002.
Brokers with the local office of CBRE Group Inc. represented MetLife in the sale to Menlo.
Also new to Menlo’s holdings in the area: 26250 Enterprise Way, a nearly 77,000-square-foot building about a mile away in Lake Forest.
CoStar records show the investor paying about $13.4 million for the office, which was sold by Irvine-based Bixby Land Co. in a deal brokered by the Irvine office of Cushman & Wakefield Inc.
Panasonic Avionics Corp., which has its headquarters nearby, is the largest tenant in the two-story Lake Forest building.
The purchases add to a string of deals for Menlo Equities totaling more than $120 million in the adjoining Foothill Ranch and Lake Forest office markets since 2012.
The privately held investor now owns nearly 580,000 square feet of office space in those two South County submarkets, which have about 50 leasable buildings totaling about 3 million square feet combined.
The company bought a three-building office campus on Enterprise Way in Lake Forest in 2012 for a reported $22 million. Those buildings serve as the corporate headquarters for Panasonic Avionics Corp.
Menlo followed that deal up in 2013 with a $37.7 million purchase of a three-building office park on Lake Forest Drive leased to Alcon Research Ltd.
The two Lake Forest office properties are about a mile and a half from Menlo’s latest purchase in Foothill Ranch.
Menlo is now believed to be the largest office landlord in the immediate area. It’s one of three areas in Orange County where the company has considerable office and industrial real estate holdings, along with Aliso Viejo and the area around John Wayne Airport.
Growth Potential
Office vacancy rates in Foothill Ranch and Lake Forest currently run about 16%. That’s nearly double the level for all of South OC’s office market, according to CBRE’s marketing materials for Campus South County.
The Campus South County campus was 58% leased at the time of its sale, giving the new owner the opportunity to capitalize on an improving office market and expected rent increases, CBRE officials said.
“Investment capital is attracted to Orange County because of the comparative basis advantage compared to other coastal markets and the dramatic disparity that still exists between today’s rents and values versus peak rents and values,” said CBRE’s Kevin Shannon, who leads the brokerage’s West Coast Institutional Group for the office sector.
Orange County “has more upside potential than most coastal markets because of these dynamics,” said Shannon, who worked on the sale along with colleagues Paul Jones, Bob Smith and Blake Bokosky.
Large tenants at the three buildings include TriAlpha Energy, Fujitsu Frontech, and Arrow North American Components, according to brokerage data.
Current monthly asking rents at the buildings are about $2.10 per square foot.
The tenant mix, “combined with the property’s strategic location and value-add positioning, fueled tremendous interest and resulted in more than a dozen offers from quality capital,” said Jones, a vice president in CBRE’s Newport Beach office.
