Irvine Company’s office properties division clearly is back as a buyer.
2011 will show whether the area’s dominant landlord also is eager to get back to building.
Irvine Co. will have spent nearly $1 billion on office properties in the past few weeks, assuming a blockbuster skyscraper deal in Chicago closes as expected by year’s end.
“We think the recovery will be stronger than many people are expecting,” said Doug Holte, president of Irvine Co.’s office properties division.
The string of deals is the most seen by Irvine Co. since the go-go real estate days of 2007, when the landlord—headed by Chair- man Donald Bren—picked up a number of offices here and in San Diego.
Recent local deals include the estimated $213 million buy of Costa Mesa’s Pacific Arts Plaza, and Newport Center’s Pacific Financial Plaza, the three-building office complex that holds the headquarters of bond fund manager Pacific Investment Management Co. and others.
That 280,000-square-foot complex—the first office in the posh Newport Center office market to sell in years and one of the few that Irvine Co. didn’t already own—is believed to have traded hands at close to $125 million.
“It was a rare opportunity for us to add to the area,” said Holte, who joined the company about a year ago, after heading up local operations of Houston-based developer Hines Interests LP.
Irvine Co.’s also rumored to be extending its buying spree to Chicago, with a deal to acquire the Windy City’s 49-story Hyatt Center office building for about $625 million. A deal would be the first outside California for the company.
Irvine Co. officials declined to comment on the deal.
“We’re still a California property company,” Holte said.
Much of the company’s immediate efforts have been on retooling the area around its own Newport Center headquarters, Holte said.
The company’s spent about $10 million of late updating some of the 12 office complexes it already owns in the area surrounding the Fashion Island shopping center, including its own headquarters building at 550 Newport Center Drive.
Fashion Island
The buy of the Pacific Financial Plaza complex will help the company “knit together” a majority of the local offices to Fashion Island, which Irvine Co. also owns, Holte said.
Fashion Island is set to get a second round of remodeling starting next year. The improvements follow a recent $100 million effort that brought more than 20 new stores to the center. The next round of work will start with a revamped Island Cinemas movie theater and come as a new city hall for Newport Beach is being built nearby.
Fashion Island is “the internal engine” for Newport Center, Holte said. “This area is the center of Newport Beach.”
The next big question for the area is whether Newport Center will see office development any time soon.
Irvine Co. is exploring future office expansion in the area, and the company has entitlements to build, Holte said. The company has “several possible alternatives” for development, he said.
Plans now “are relatively preliminary,” Holte said. Any building that does go ahead “will be an exceptional (development), and a terrific new chapter” to the area, he said.
High-Rise?
The company’s been mum on specifics, but several real estate sources said Irvine Co.’s been looking at building another high-rise office in the area, which could run 300,000 square feet or so.
It would be the first high-rise office to go up in Newport Center in decades, and likely command the most expensive rents in town, possibly by a wide margin.
Who could afford to lease space there? Sources look to nearby bond fund manager Pimco as a potential tenant, although there are questions about whether a new tower would have the floor space required for Pimco’s trading floor operations.
Pimco, part of Germany’s Allianz SE, leases about 180,000 square feet at the recently sold Pacific Financial Plaza. Its lease there runs about another four years. The company’s given no public indication that it’s looking to move.
Pimco also was rumored to be in the running last year to buy the two-building headquarters of Downey Financial Corp. a few miles away in Newport Beach. The company denied those claims, which ended up being unfounded.
Holte said it’s too early to say whether any new Newport Center development by Irvine Co.—high-rise or otherwise—would be done.
“We’ll see how robust the market is,” he said.
