There’s a new set of owners overseeing four of the most prominent office buildings on the skyline of Orange and Anaheim following a series of sales that reached about $250 million combined.
The four buildings—City Tower, 500 Orange Tower, Stadium Towers Plaza and 3800 Chapman—were snapped up by a trio of out-of-town institutional investors who appear confident about the prospects for rental growth and price appreciation in Central Orange County’s office market.
Greenwich, Conn.-based Starwood Capital Group bought a pair of the buildings in the city of Orange: the 500 Orange Tower, a 14-story, 280,340-square-foot office on North State College Boulevard; and 3800 Chapman, an eight-story, 172,000-square-foot office.
Starwood is believed to have paid about $70 million for 500 Orange and $25 million for 3800 Chapman, according to real estate sources familiar with the sale.
That works out to close to $250 per square foot for 500 Orange, which brokerage data show is about 41% leased. It comes to about $145 per square foot for 3800 Chapman, which is about 85% occupied.
Stadium Towers
CIM Group LP, a Los Angeles-based investment group, is said to have paid about $60 million for the 12-story Stadium Towers Plaza, a 262,360-square-foot office at 2400 E. Katella Ave. next to Angel Stadium.
That deal translates to a little less than $230 per square foot for the tower, which is about 85% occupied.
Stadium Towers, 500 Orange Tower and 3800 Chapman were each sold by Bethesda, Md.-based CWCapital Asset Management LLC as part of a larger national portfolio sale of troubled real estate assets and loans.
The fourth and largest of the four local buildings to sell, the 21-story City Tower in Orange, is now owned outright by New York-based Torchlight Investors.
Torchlight—which, like CWCapital, is one of the country’s largest special servicers for distressed properties—had been acting as the operator of City Tower since 2011, when it took over control of a $115 million nonperforming loan tied to the office.
The tower, at 333 City Blvd., is about 413,000 square feet and is Central OC’s largest office tower.
Torchlight had listed the nonperforming note for sale last October but recently paid about $95 million to buy the nonperforming note itself.
It now owns the building outright, according to real estate sources.
The price Torchlight paid for the note works out to about $230 per square foot for City Tower, where the occupancy rate is near 85%.
The building has a replacement value of close to $175 million, according to marketing materials for the property.
The four buildings were listed for sale late last year by Los Angeles-based CBRE Group Inc.
Local CBRE brokers involved in the four sales declined to comment on the transactions.
Zombies No More
The sales clear an air of uncertainty surrounding the four offices, which all had been burdened with financial constraints under prior ownership, leaving most of them with larger-than-normal vacancies and a designation among area tenant and leasing brokers as “zombie buildings” in recent years.
Each building was previously owned by Los Angeles-based MPG Office Trust Inc., which was Orange County’s second-largest office landlord at the peak of the last real estate cycle.
MPG, previously known as Maguire Properties Inc., picked up the buildings in 2007 as part of its $2.9 billion buy of OC and L.A. offices from Equity Office Properties Trust.
The buildings had close to $400 million in debt tied to them at the time Maguire bought them. Each eventually fell behind on their debt payments in the economic downturn and softening local office market, placing them in a multiyear state of limbo as their ownership and financing issues were being sorted out.
Torchlight took over control of City Tower in 2011, and CWCapital took over ownership of the other three buildings in 2012.
Starwood Capital’s two local office purchases were among the largest buildings it acquired as part of a $191 million buy of a pool of office and retail assets from CWCapital. Other properties it acquired are in Sacramento, Arizona, Tennessee, Virginia and Kansas.
Near Term
Not all of those purchases are expected to be long-term investments.
Mark Keatley, senior vice president for Starwood, said the company intends “to sell several assets in the near term, and deploy our in-house REO/workout team and operating platforms to create value on the remainder of the pool.”
The low vacancy rates of the two OC offices Starwood just bought make it unlikely they would be flipped in the near term, according to sources.
CIM Group’s local purchase also was part of a larger pool of assets sold by CWCapital, including Two California Plaza, a 52-story, class A office building in Downtown Los Angeles.
That tower, L.A.’s third-tallest building, is said to have traded hands for nearly $300 million.
Some real estate observers said the biggest surprise of the four local sales was that New York private equity giant Blackstone Group was not involved.
Blackstone’s office division, Equity Office, has snapped up several other local office projects over the past year and was believed to be interested in reacquiring some of the Central OC buildings it sold to Maguire in 2007.
Blackstone did acquire some of the nonlocal assets sold by CWCapital in its auction, including a New York office building and a resort in Texas.
