A prominent South Coast Metro office tower has been bought by an investment group out of Korea, in one of Orange County’s largest office transactions of the year.
Two MacArthur, a nine-story building alongside the Costa Mesa (55) Freeway, near the headquarters campus of title insurer First American Financial Corp. (NYSE: FAF) recently sold for $86 million, or about $391 per square foot.
It’s the second time the building, which counts the State of California as its primary tenant under a long-term lease, has traded hands in a little more than a year.
The latest sale marks a $3 million increase from the $83 million the 220,000-square-foot building sold for in June 2019, when a venture of New York-based private equity firm Angelo Gordon & Co. and Santa Monica-based Ocean West Capital Partners bought the building from Equity Office Management LLC.
Angelo Gordon and Ocean West also bought companion tower One MacArthur last year from Equity Office, for $54 million.
The difference in pricing for the two building sales last year had a large part to do with the tenant make-up of each tower, which are about the same in size and both largely full, according to market watchers.
Equity Office paid a reported $82.5 million at the end of 2013 for the two towers in a deal that valued each office around $192 per square foot.
There’s been no reports that the Angelo Gordon and Ocean West partnership are looking to sell the other tower at MacArthur Place.
Foreign Investment
Korea Investment & Securities Co., a financial services affiliate of investment firm Korea Investment Holdings, is the new owner of Two MacArthur.
The company financed the deal in part by a $35.4 million funding round from investors, according to reports.
The State of California takes most of Two MacArthur under a long-term lease; Radiology Partners is also a sizeable tenant there.
The state’s lease runs another 16 years, and the deal is expected to generate annual returns in the 7-8% range for the new owners, according to news reports out of Asia.
The Santa Ana deal is the largest local office transaction since August, when PRP Real Estate Investment Management bought the two largest buildings at Irvine’s FivePoint Gateway office campus for $355 million.
That’s the largest office sale in Orange County in three years. PRP is based in Washington, D.C.
Korea Investment & Securities has been increasing its U.S. footprint in recent years; the deal for Two MacArthur is the second reported transaction in the state for the company so far this year, following a $200 million investment in housing assets at the University of California-Davis.
The South Coast Metro property “is close to the upscale neighborhood of Irvine, but officially in the administrative district of Santa Ana, allowing a relatively affordable price tag,” Korean reports noted.
The FivePoint Gateway buildings, leased to Broadcom under a long-term deal, sold for about $537 per square foot, or about $146 per square foot more than Two MacArthur.
Few Blockbusters
There’s only been a handful of area office sales topping $50 million this year, as the pandemic has slowed the pace of transaction making.
Two MacArthur’s sale is on equal footing with the $86 million sale of two buildings at the Summit Office Campus in Aliso Viejo. The buildings, at 20 Enterprise and 30 Enterprise, sold in April for $42.7 million and $43.3 million, respectively.
The top pre-pandemic office sales in OC this year was for two buildings at Brea Place, in a deal that closed in March.
Hines Interest LP paid $95 million to buy out financial partner Oaktree Capital Management LP for two of its remaining holdings in the office campus next to Brea Mall.
