The pace of blockbuster property sales continued its slump in 2009, although some of Orange County’s larger tenants began to ink more deals thanks to favorable market conditions.
The combined total of OC’s 10 largest office, industrial, retail and apartment sales was about $1.2 billion in 2009.
That’s nearly an 8% drop from a year earlier and more than 50% below what was seen during more active times for commercial buildings just a few years ago.
Last year’s combined totals were the lowest reported by the Business Journal in six years.
Local results could have been worse—if not for OC seeing more than its fair share of distressed asset sales last year, particularly for office properties.
On a national basis, commercial property sales in 2009 fell to levels not seen since the 1990s, according to New York-based re-search company Real Capital Analytics Inc.
On the upside, the square footage for OC’s 10 largest office leases in 2009 was nearly 45% above 2008’s sluggish levels, while the largest industrial leases in 2009 were nearly 80% larger on a square foot basis than 2008 levels (see story, page 25).
In the ensuing pages, the Business Journal has published the top sales and leases of 2009 in the office and industrial markets, as well as the largest apartment and retail sales.
Data was provided by CoStar Group Inc., Business Journal records and individual submissions. Sales are ranked by dollar amount and lease deals by square feet.
The Business Journal defines a deal as one building, a multi-building campus or an office or industrial park. Large institutional sales of portfolios of separate buildings or a property with a large mix of uses aren’t included.
Hotels aren’t included in our list of top deals, although OC’s seen its share of national exposure due to distressed hospitality properties changing hands, as well as local owners such as San Clemente’s Sunstone Hotel Investors Inc. handing over the keys to several of its out-of-town properties.
Big hotel properties that saw new owners in 2009 include Dana Point’s St. Regis Resort Monarch Beach, which was taken over by lenders last summer, as well as the Wyndham Orange County, which was bought out of foreclosure in Novem-ber for $21 million by an affiliate of Hong Kong-based developer Wincome Group of Cos.
Office Sales
Distressed property sales also made up a large chunk of last year’s office sales.
Continued pain in OC’s beleaguered office market—long the area’s most active building type in terms of sales—was largely behind the year-to-year drop in total sales.
The 10 largest office sales totaled about $500 million last year, a 22% drop from a year earlier. Combined sales of the largest office buildings here regularly topped $1 billion during the market’s heyday a few years ago.
SK Hart Properties LLC paid $53 million for the former headquarters of now-defunct Downey Financial Corp. This was the largest deal in the country overseen by the Federal Deposit Insurance Corp.
Among other notable distressed building acquisitions, a partnership that included Newport Beach’s Greenlaw Partners paid $56 million late last year for an office tower in Irvine that opened in 2007 at 2050 Main St.
The 2050 Main St. building’s developer, Phoenix-based Opus West Corp., filed for bankruptcy earlier in the year. Bank of America Corp., the property’s main lender, directed the office sale.
Three offices on this year’s list were sold by Los Angeles-based Maguire Properties Inc., including the highest-priced office deal of 2009: the former 3161 Michelson office tower in Irvine’s Park Place complex.
New York-based Emmes Group of Cos. paid $153 million for the trophy property—now called the Michelson—which opened its doors in 2007. That price is about 40% below the 19-story building’s reported construction cost.
Owner-users snapped up three of the 10 priciest offices sold last year, including two midsize buildings in Irvine, bought by Allergan Inc. and Chapman University, as well as a Costa Mesa office and lab building that’s expected to be used in part by Los Angeles-based biotech company Abraxis BioScience Inc.
Industrial property sales saw a drop similar to their office counterparts in the prices paid for the most expensive buildings last year. The top industrial sales totaled about $147 million, roughly a 22% drop from 2008 levels.
Two sales by affiliates of New Jersey-based Prudential Financial Inc. were responsible for a bulk of the total dollars spent on large industrial buildings here last year.
In the biggest industrial deal of the year, Corona-based investor and developer Watermarke Properties Inc. bought from Prudential the Saddleback Business Park, a 388,224-square-foot industrial complex in Laguna Hills. That $62.3 million deal, struck in June, is the largest industrial sale OC’s seen in nearly three years.
Watermarke—which was born out of now defunct Santa Rosa Developers Ltd., a homebuilder also based in Corona—had primarily been an apartment investor before the Saddleback deal.
But it has been trying its hand at other property types of late.
In late 2009, Watermarke paid $20 million for a new 90,000-square-foot Anaheim office that was built on the campus of Carpinteria-based CKE Restaurants Inc.’s Carl’s Jr.
Prudential also was behind the third-largest industrial deal of 2009, selling off the Santa Ana Distribution Center on Standard Avenue in April, for $25.5 million. The buyer was New York-based investor KTR Capital Partners.
A sell-off by another insurance company, Milwaukee-based Northwestern Mutual Life Insurance Co., dominated apartment transactions in 2009. Three complexes sold by Northwestern in early 2009 raised more than $200 million and sold at an average of $147,000 per apartment.
Northwestern also sold off at least another $200 million of apartments in Northern California and on the East Coast at the same time it ridded itself of its OC portfolio.
Walnut Creek-based Sequoia Equities Inc. paid Northwestern $75 million for the 484-unit Alize at Aliso Viejo complex in April, for the largest apartment deal here last year.
Other investors doing business with Northwestern included Stoneridge Capital Partners of Newport Beach, which paid $70 million for a 498-unit Rancho Santa Margarita complex, as well as Newport Beach-based Pacific Coast Management, which paid $56.3 million for the Aventine at Aliso Viejo complex, which has 386 apartments.
All told, the 10 largest apartment sales last year traded for a combined $393 million, which is 10% higher than the totals from a year earlier.
Retail also registered a year-over-year increase in sales. The 10 largest retail transactions totaled about $172 million, a 42% increase from 2008.
The largest retail sale of the year took place in June, when Westlake Village-based DSB Properties Inc. paid $45.3 million for the 144,726-square-foot Old Ranch Towne Center in Seal Beach.
The second-largest retail sale was Newport Beach-based Burnham USA Equities Inc.’s $35 million purchase of Costa Mesa’s South Coast Home Furnish-ings Center.
The sale was court-overseen. The property’s prior owner had defaulted on an $84 million loan for the struggling 300,231-square-foot mall, which now is being reworked by the new owner to include office space.
