A 216,864-square-foot Santa Ana office building has traded hands for about $55 million, marking one of the largest investment sales in Orange County this year.
The 10-story tower at 4 Hutton Centre is the third office building to sell in the immediate area since May, following the sale of One & Two MacArthur Place towers down the street.
LaSalle Investment Management, a real estate investment subsidiary of Chicago-based JLL, closed on the purchase of 4 Hutton late last month for $54.8 million, or $252.57 per square foot.
The purchase is the first in Orange County for LaSalle Investment Management since the previous market cycle— it had previously owned a few office buildings in the early 2000s—and marks a sign of continued institutional investor interest in Orange County real estate, which had been experiencing a pullback, according to local brokers.
Institutional Interest
The property is part of the 46-acre Hutton Centre mixed-use complex at the corner of MacArthur Boulevard and the (55) Freeway, which has six office towers, restaurants, a 349-unit residential tower complex, and a DoubleTree Club by Hilton.
Jeffrey Cole, Ed Hernandez, and Nico Napolitano from the local office of Cushman & Wakefield represented the buyer and seller in the transaction.
Larger tenants at the building include Stearns Lending, Sharp Electronics Corp., and marketing agency MediaMix365.
Sharp Electronics will be decreasing its square footage at the building through 2020, vacating 11,300 of its total 33,654 square feet. Including that retrenchment, 4 Hutton is currently about 82% leased.
Average monthly rents for the property are about $2.30 per foot with market rents in the $2.80 to $2.90 range.
The previous owners, an affiliate of Columbus, Ohio-based investment firm Liu Living Trust, paid $37 million for the property in 2011—nearly 50% less than LaSalle—and have invested an additional $3.7 million since.
Other notable institutional investment transactions in the area in recent years was CBRE Global Investors’ $120 million buy of 2600 Michelson, a 310,925-square-foot office tower in Irvine that was 99% leased at the time of sale in late 2017.
Though some brokers have noticed a slowdown in institutional capital in the region, others have pointed to continued strong interest.
An Orange County office market report by Voit Real Estate Services said institutional investors have their eyes on Orange County, “regularly trading trophy properties and office campuses.”
“Capital costs remain low, fueling steady institutional demand for office buildings, even amid record high pricing and fewer value-add opportunities,” the report said.
Airport Area Activity
Along with the sale of One & Two MacArthur in May and June, the three recent Santa Ana transactions total close to $200 million in sales volume.
Chicago-based Equity Office Management LLC recently sold the two office buildings in a series of transactions to a venture of New York-based private equity firm Angelo Gordon & Co. and Santa Monica-based Ocean West Capital Partners.
Two MacArthur, a nine-story office alongside the Costa Mesa (55) Freeway and next to the headquarters campus of title insurer First American Financial Corp. (NYSE: FAF), is the latest Equity Office building to sell.
The office runs about 220,000 square feet, and sold for about $83 million, or nearly $380 per square foot.
It’s the second deal between Equity Office and the Angelo Gordon-Ocean West venture in the last couple months; in May the Business Journal was first to report on the sale of One MacArthur building that was reported to have sold for $54 million.
The two buildings total about $137 million, marking a nearly 66% premium on what Equity Office paid in 2013.
La Salle’s return to the OC market seems to come at a time when Equity is shedding some of its local portfolio.
In addition to One & Two MacArthur, Equity has three other notable local projects on the market since April, real estate sources tell the Business Journal.
The nearly 600,000 square feet of inventory for sale includes The Landing, a 237,000-square-foot office project on Red Hill Avenue in Costa Mesa; a 175,000-square-foot office in Laguna Niguel; and the 195,000-square-foot Anaheim City Centre.
