Two area real estate developers have bought two large industrial buildings in the Irvine Business Complex area vacated last year by Royalty Carpet Mills Inc., in separate deals valued at more than $70 million combined.
A third transaction involving Edwards Lifesciences Corp.’s purchase of a roughly 9-acre Royalty Carpet site next to its Irvine headquarters is likely to exceed $25 million and could be completed soon, real estate sources tell the Business Journal.
In the largest of the two recently completed sales, the local office of Houston-based Hines bought 515 E. Dyer Road, a 414,309-square-foot building on nearly 18 acres in Santa Ana a few blocks from the Costa Mesa (55) Freeway.
The real estate company, which owns and manages numerous office Orange County properties but hadn’t invested in industrial buildings here before other than sites for entirely new development, paid about $57 million for the Santa Ana building, according to CoStar Group Inc. records.
In Irvine, Newport Beach-based Turner Real Estate Investments bought a smaller building at 17352 Derian Ave. from Royalty Carpet. The 133,000-square-foot industrial property is about a block from the Diamond Jamboree shopping center.
Turner Real Estate paid a Royalty Carpet affiliate about $14.6 million, or $110 per square foot, for the vacant building, CoStar records show.
It’s Turner’s largest industrial investment in OC in several years.
The new owners of the Santa Ana and Irvine buildings are planning to update the properties—among the largest empty industrial buildings near John Wayne Airport—and lease them out in the next few months.
Hines Hunting
The Santa Ana deal is the first of several area industrial deals Hines plans to make this year, according to Ray Lawler, senior managing director of the developer and investor’s local office.
“We plan to be very active in industrial this year. We’ve wanted to get into the sector for quite some time” in order to expand its local portfolio of property types, he said.
Hines’ Newport Beach office has built one of the largest office portfolios in OC over the past seven years, buying several million square feet of buildings in the region.
The industrial property’s $57 million price tag tops many local Hines office deals in total price and by square foot.
The deal for the East Dyer property was about $138 per square foot.
Hines took out a $46.6 million loan from Acore Capital Mortgage to finance the purchase, property records show. It said in a statement that it’s already begun “a robust capital improvement plan” for the 64-year-old building.
When renovations are complete, it “will be ideally positioned for last mile distribution or more traditional manufacturing and warehouse tenants,” said the buyer, which indicated it plans to invest in other area industrial properties.
“It’s the only big block of space in the area” available for those types of industrial tenants, Lawler said last week.
Turner Turnaround
A similar plan is envisioned for the Derian Avenue building, according to Rusty Turner, president and chief executive of the privately held investor and developer.
Built in 1972, the property will be leased out following a renovation, Turner said. “It needs a lot of love right now.”
He said his firm initially planned to buy and keep the Dyer property, in addition to the Derian Avenue building, but ultimately, “Hines wanted it more than I did.”
A Turner affiliate bought the Dyer Avenue building in December from Royalty Carpet for about $45.6 million, then sold it to Hines for nearly $12 million more than it paid, property records show.
Hines bought the Santa Ana building in a partnership with Newport Beach-based Pacific Investment Management Co., according to real estate sources.
Pimco also acted as a financial partner with Hines in the 2015 purchase of Irvine’s Intersect, a multibuilding office campus near the airport that’s undergone a major redevelopment since the sale.
Edwards Interest?
Both recently sold industrial buildings were put up for sale last June after Royalty Carpet, a longtime Irvine-based carpet manufacturer, abruptly announced it and several affiliates had closed, ending a nearly 50-year run for the company. It was founded in the 1960s by Mike Derderian and employed several hundred people.
The company moved to Irvine in 1973, and had amassed a sizable real estate portfolio in and around the city over the years, with holdings at one point topping a million square feet.
Derderian died in 2013, and the company had since unloaded a few other real estate assets in the airport area.
The largest local asset that hasn’t sold is its headquarters, a 193,000-square-foot property on Red Hill Avenue next to Edwards Lifesciences’ campus. A deal for the site could come soon, and will apparently involve Edwards, OC’s largest public company by market value.
Multiple sources tell the Business Journal a deal with the medical device maker is close to being finalized, although such a transaction hasn’t been announced, nor has a sales price. But it likely wouldn’t amount to much more than a footnote for Edwards, which as of last week was valued at about $25 billion.
Its multibuilding campus next-door to the Royalty Carpet building totaled about 650,000 square feet as of last year, according to city records. It’s been upgrading the property in recent years, adding facilities and employee amenities.
Company officials have previously expressed interest in buying the Royalty Carpet site in order to further expand local operations.
It’s made other recent area deals. Last year the company paid a reported $18.5 million for a roughly 70,000-square-foot building next to its headquarters on Alton Parkway.
Edwards hasn’t indicated in public filings that it’s under contract to buy the Red Hill property, though multiple real estate sources say it’s assumed the company is in escrow to buy it.
