Four Orange County office complexes bought in 2007 by Irvine’s Bixby Land Co. and institutional investors in a $345 million portfolio deal were placed into receivership last week.
Orange County Superior Court records show that entities tied to the four complexes—Redstone Plaza and 1201 Dove Street in Newport Beach, Bixby Office Park in Seal Beach and Inwood Park in Irvine—were placed into court-overseen receivership.
Lenders filed notices of default against the properties in October.
All of the complexes were bought from Los Angeles-based Maguire Properties Inc., now known as MPG Office Trust. Bixby held a minority stake in the properties.
The mid- and low-rise office complexes total close to 700,000 square feet of space. They make up the bulk of a five-property, 816,000-square-foot portfolio of buildings that Bixby and its partners bought near the peak of the local office market.
The fifth complex acquired by Bixby and its partners was Irvine’s Fairchild Corporate Center.
A search of court records didn’t show Fairchild Corporate Center, which now goes by Newport Summit, with any notice of default filed against it. But one is expected, according to real estate sources.
The main lenders are subsidiaries of New York-based insurer American International Group Inc., according to court records.
The properties were bought in early 2007 through a venture of Bixby and Mercantile Real Estate Advisors Inc., a pension fund adviser that now operates as PNC Realty Investors Inc.
Like most commercial real estate deals completed during the frothy outlook in early 2007, the pension fund adviser was the primary investor and acted as the majority partner in the deal.
It was PNC Realty’s decision to default on the offices, according to real estate sources.
Bixby is said to have been working to restructure the loans with lenders until PNC made its decision to default a few months ago.
“The effect of this economic downturn has been particularly impactful to Orange County office rents and vacancies,” Bixby Chief Executive Bill Halford told the Business Journal in a statement. “Given the combination of declining cash flow and rapid property value deterioration, it’s not surprising that our majority partner PNC Realty Investors—like other investors throughout the industry—elected to strategically default.”
Owners of at least 5 million square feet of high-end OC offices and industrial buildings that traded hands in 2007 have defaulted on their loans, seen their buildings go into receivership or been foreclosed on.
Given Bixby’s “minority equity investment in the joint venture, this will have no material impact on our company’s overall health,” Halford’s statement said.
Bixby is said to have written off its investment in the offices last year, according to sources familiar with the company.
Officials with San Diego-based Triglid, a distressed real estate, loan recovery and real estate firm, have been appointed receivers of the four properties, according to court records.
The buildings list monthly rents running in the $1.60 to $2.30 per square foot range. That’s well below the $3 or more expected at the time of their 2007 sale.
Acquisitions
Bixby, a privately held real estate investment trust, has spent the past few years repositioning its portfolio and adding institutional-grade properties.
Last month it made its largest acquisition of the year, a $15 million deal for an industrial building in the Bay Area.
The building serves as the U.S. headquarters for France’s AsteelFlash Group, a contract electronics maker.
Bixby’s wholly-owned portfolio totals about 4 million square feet. It remains conservatively leveraged and counts an occupancy rate of about 95%, according to Halford.
The portfolio has seen “steadily improving year-over-year revenue since 2007,” he said.
