Newport Beach-based MIG Real Estate has made its largest-ever office purchase, snapping up a four-property portfolio in San Diego for about $56 million.
MIG Real Estate, which also operates under the Merage Investment Group Real Estate name, acquired five buildings totaling about 367,000 square feet in the deal, which was announced last week.
The transaction includes two properties in San Diego’s Sorrento Mesa area. They total about 131,500 square feet.
Also in the deal was a two-building complex in Kearny Mesa that runs 126,900 square feet, and another 108,500-square-foot building in the Mission Valley area.
The sale works out to a sale price of about $153 per square foot for the offices, which are on about 17 acres of land. Most of the buildings were built in the mid-1980.
The name of the seller wasn’t disclosed, but property records indicate ties to Boston-based investor Guggenheim Real Estate, which invests money for wealthy individuals, as well as endowments and institutions.
Second-Largest Buy
It’s the second-largest purchase of any property type for MIG Real Estate, behind a $70 million Rancho Santa Margarita apartment complex bought about two years ago, said Greg Merage, the company’s chief executive.
Greg Merage handles day-to-day operations for MIG Real Estate, the real estate arm of investment firm MIG Capital.
Paul Merage, the creator of the Hot Pockets snack food and a prominent benefactor of University of California, Irvine, is Greg’s uncle and chairman of MIG Capital.
The San Diego deal is the latest in a two-year string of acquisitions for MIG Real Estate. The investor has bought more than 2.5 million square feet of offices, shopping centers, hotels, apartments and other properties since early 2009.
About 1.3 million square feet of space has been purchased this year, according to the company, which until this year operated under the Stoneridge Capital Partners name.
Along with Southern California, the company’s been active buying properties in Phoenix, Las Vegas, Hawaii and Denver, among other areas.
The collapse of a larger, $306 million Southern California office portfolio sale proposed last year appears to have given MIG the opportunity to pick up the San Diego properties.
San Diego-based Pacific Office Properties Trust Inc., a real estate investment trust that kicked off operations in 2008, announced a deal last year to buy a 1.9 million-square-foot portfolio of offices in San Diego, Orange County and Los Angeles.
The 12-building portfolio was slated to be acquired from affiliates of Guggenheim Real Estate at a price of about $161 per square foot, but the deal collapsed earlier this year.
Reasons for the $306 million deal not going through weren’t disclosed. Pacific Office Properties said in filings with the Securities and Exchange Commission earlier this year that it incurred $7.9 million in acquisition costs before the deal fell apart.
MIG Real Estate’s latest acquisition is for the San Diego portion of the aborted deal.
Those four properties were between 63% leased and 79% leased at the time Pacific Office announced its planned acquisition, according to regulatory filings.
Greg Merage said that MIG Real Estate beat out several well-known investment groups in buying the San Diego portfolio.
‘Certainty of Close’
“Our track record of successful transactions demonstrates a ‘certainty of close’ that we feel has been a huge benefit for us in this competitive marketplace,” Merage told the Business Journal last week. “While we cannot speak to Pacific Office, we believe these factors are what set us apart from the other investment groups.”
The collapsed Pacific Office-Guggenheim sale was expected to include two OC-area properties, totaling about 270,000 square feet of space.
One of those properties, a three-building complex in Lake Forest, recently was put back on the market by affiliates of Guggenheim, at a price of $35.5 million.
The campus, totaling about 152,880 square feet, was put on the market for sale earlier this month. Along with Guggenheim, Newport Beach-based real estate investor Greenlaw Partners also has an ownership stake in the building, according to CoStar Group Inc. data.
Bob Caudill and Bret Hardy, brokers with the Irvine office of Colliers International, have the listing for the buildings, which are completely leased to Britain’s Invensys PLC, an engineering software company.
Invensys pays about $2.5 million annually in rents for the buildings, and has a lease for the entire project through mid-2019. Two of the company’s subsidiaries use the Lake Forest buildings, which were previously known as the Allred Corporate Center, as their headquarters.
The complex is going to market at a capitalization rate of 6.95% and a sales price of about $228 per square foot, according to Colliers’ marketing materials for the property.
The other OC office building previously expected to trade hands in the Pacific Office portfolio buy is an 118,000-square-foot office in Tustin that’s leased to Toshiba America Medical Systems Inc., a maker of medical imaging equipment.
That building is no longer up for sale, according to CoStar’s data.
