As one large real estate investment group plans to move from Orange County, another is just stepping up its local activities.
The changes in portfolio strategies came together for each firm last week when Brookfield Properties Corp. completed the sale of its remaining Orange County asset, 3 Imperial Promenade in Santa Ana, to a public pension fund client of Lend Lease Real Estate Investments Inc. for $51.6 million.
Lend Lease Real Estate Investments is a subsidiary of publicly traded Lend Lease Corp., based in Sydney, Australia. The Atlanta-based investment fund manager now oversees an office portfolio in Orange County valued at more than $300 million.
The deal, which equates to about $217 a square foot, means that Toronto-based Brookfield will close its office in the 11-story 3 Imperial Promenade and officially move its regional commercial real estate operations to Denver.
The Santa Ana office, which in the early 1990s had around 100 employees, has been downsizing for years and now has one staff employee. It is along MacArthur Boulevard next to the new home of First American Financial.
A former Brookfield executive who left the company last year, H. Gordon MacKenzie, said a new owner that bought Brookfield after 3 Imperial Promenade was built found the 239,000-square-foot office tower less desirable.
MacKenzie, the former president of Brookfield’s American operations who is now president of Polygon Development in Costa Mesa, explained that Bell Canada Enterprises owned the company when 3 Imperial Promenade was developed in 1991.
But a few years later, the Toronto-based Edper Group purchased the company.
“Most of Brookfield’s presence in California has been in land and residential development,” said MacKenzie. “The new group wanted the commercial side to be more focused on urban downtown buildings in places like New York, Boston and Denver. So 3 Imperial Promenade just didn’t fit into their plans.”
The building has been on the market for more than a year.
Acquisition Mode
Lend Lease, on the other hand, is building its Orange County portfolio.
“This is the fourth Orange County office building we’ve acquired in the past 12 months,” said David Jankowski, vice president of Lend Lease.
The company has spent more than $100 million in local acquisitions in a little more than a year, according to Jankowski.
He said Lend Lease liked the 3 Imperial Promenade building for its location, 98% occupancy rate and stylish design.
Jankowski added that another plus for the office complex is the number of projects about to get under way nearby.
First American has plans to build more offices next door. In addition, Nexus Development is close to finalizing details of a construction loan that would enable the start of more than 400,000 square feet of new office space adjacent to 3 Imperial Promenade. Los Angeles-based MSC.Software has already signed a 12 1/2-year lease to be the anchor tenant for the project, which will include twin nine-story towers. The company, which makes specialty software for design engineers, plans to move 200 employees to Santa Ana.
Also in the works nearby are 250-plus high-end apartments and more than 90 townhouses to go with 20,000 square feet of retail. That project, called The Pinnacle at MacArthur, recently received final permits from Santa Ana.
“So we’ll probably have delivery of some units by the end of this year,” said David Wood of San Francisco-based BRE Properties Inc., which is developing the Pinnacle site.
“All of the activity going on around 3 Imperial Promenade will certainly benefit our tenants,” said Jankowski. “It will bring more amenities and even more exposure to the entire area.”
The 9-year-old 3 Imperial Promenade is across the street from another of Lend Lease’s recent Orange County acquisitions: the 140,000-square-foot 200 E. Sandpointe office building in Hutton Centre, which was added to the company’s local portfolio in the first quarter of 1999. Paychex, a payroll processing company, is the building’s major tenant.
In mid-1999, Lend Lease bought two other Santa Ana office complexes: the 185,000-square-foot, two-building Clauset Center along Harbor Boulevard near MacArthur Boulevard and the 112,000-square-foot PacificCare building in Laguna Hills.
“We’re bullish on the Orange County market,” said Jankowski. “Our clients at times have interests in acquiring good office buildings, and we’re always looking at good opportunities in this market.”
Regional HQ Here
Along with a professional staff of nine in Irvine, Lend Lease operates a regional headquarters from Orange County. The local office handles deals throughout Southern California for the company as well as overseeing activities from Phoenix to Denver.
Lend Lease’s latest Orange County acquisition, which has as major tenants Syndicated Office Systems and Deloitte & Touche, will be managed by Insignia/ESG. It had been managed by Brookfield.
Lend Lease manages a Southern California portfolio worth more than $2 billion and totaling 6 million square feet of office and industrial space. In the U.S., Lend Lease now has more than $31 billion in assets. n
