Newport Beach-based real estate investor Greenlaw Partners added another Irvine office tower to its portfolio, at a big discount.
Greenlaw worked with a pair of private equity firms to take over ownership of 18301 Von Karman Ave. for what is believed to be a fraction of the cost the prior owners paid for the building at the peak of the commercial real estate market in 2007.
The 230,615-square-foot building, part of the four-building Von Karman Towers office complex near John Wayne Airport, serves as the headquarters for food supplier Golden State Foods Corp.
Terms of the sale weren’t disclosed. Officials for Greenlaw declined to comment on the buy or their role in the new ownership team.
The building traded hands for $41 million, according to sources not directly involved in the deal.
At that price, the building would have sold for about $180 per square foot, well below the $380 per square foot price just paid for another office at the same office complex, the 2211 Michelson tower.
Los Angeles-based real estate investor Kilroy Realty Corp. paid $103 million for the 2211 Michelson office tower about a month ago, in the priciest office sale Orange County’s seen in nearly two years.
In addition to being just a few years old, the 2211 Michelson tower is 93% full with most tenants paying monthly rents of more than $3 per square foot.
The 18301 Von Karman office, in comparison, was built in 1989 and is only about 40% full. Monthly rents there are listed at $2.10 per square foot, according to CoStar Group Inc.
Greenlaw and its two private equity partners in the deal—New York-based Westbrook Partners LLC and Chicago’s Walton Street Capital LLC—are the fifth set of owners the building’s had since 2007.
The building’s changing ownership reflects the recent ups and downs the local office market’s seen during that time.
Ownership
Hearn Co., a Chicago-based real estate investor, bought the building from Los Angeles’ Maguire Properties Inc. (now known as MPG Office Trust Inc.) for a reported $112 million in summer 2007, near the peak of the commercial real estate market. Maguire itself had only owned the building for less than a year.
The sale to Hearn went for a sky-high $486 per square foot. That price was more than $100 per square foot higher than most of the other individual office deals made that year. The building was nearly 90% full at the time of the Hearn sale.
A year later, an affiliate of Newport Beach’s KBS Realty Advisors bought a $76 million first mortgage and a $9 million mezzanine loan tied to the property.
Hearn fell behind on loan payments beginning in summer 2009, according to regulatory filings made by KBS.
KBS received a deed in lieu of foreclosure—when a borrower gives back a property to a lender to avoid foreclosure proceedings—and gained control of the Von Karman property in October.
At the end of 2009, KBS—which sold the building to Greenlaw and its partners—placed a value of about $39 million on the property, according to Securities and Exchange Commission filings.
Good News
The 18301 Von Karman building’s seen more good news of late, other than the latest sale.
Earlier this month, Golden State Foods announced it was extending its lease at the property for another 10 years, according to officials with the Newport Beach office of brokerage Grubb & Ellis Co.
The 32,000-square-foot lease is an expansion of about 6,000 square feet for the Irvine-based company, according to Grubb, which represented Golden State in the lease.
Greenlaw’s had success leasing up its other recently acquired office tower in Irvine.
Late last year, the company teamed up with Westbrook and Walton Street on a deal to buy Irvine’s 2050 Main St. office tower.
The $56 million cash deal, which traded at about $177 per square foot, was the third-largest office sale of 2009.
The 13-story building also was acquired from the lenders of the previous owner—Phoenix-based Opus West Corp.—at a steep discount compared to its construction cost.
Since that sale, the new owners have brought the formerly 30% occupied building closer to 60% full.
Dean Chandler and Jeff Morgan, brokers with the Newport Beach office of CB Richard Ellis Group Inc., are handling leasing for the 18301 Von Karman building under the new ownership.
Jeff Cole, executive director for the Irvine office of Cushman & Wakefield Inc., represented Greenlaw and its partners in the latest sale.
