A San Diego-based developer interested in building a $60 million office campus has reached agreement to buy nearly 20 acres in South Orange County.
The deal, which is expected to close by the end of May, is the first step in plans by the Douglas Allred Co. to develop some 350,000 square feet of low-rise space at A.J. West Ranch in Lake Forest.
“We’ve been looking at this site for about five years,” said David Allred, the company’s executive vice president. “We’ve just been waiting for an opportunity to develop it.”
When Newport Beach-based Turner Development put the site on the market last year as part of its 50-plus acre A.J. West Ranch project, Allred said his family business jumped at the opportunity.
But first the company had to outbid a host of others for the rights to the parcel.
“The market is on fire in South Orange County,” said John Griffin, who is marketing the ranch along with Trent Walker and Louis Tomaselli for Voit Commercial Brokerage.
“Essentially, with this deal, A.J. West Ranch has sold out in six months,” he added.
A little more than 2 acres, split into separate parcels, are still up for sale.
Another 5.5-acre site also was available until last week. That parcel, however, are now under preliminary agreement to be sold to Piptite Technologies Inc. The company is an arm of Piptite Medical Systems, a medical research firm in Sunnyvale.
If the deal goes through, Piptite plans to consolidate its Northern California operations and labs in Maryland and Iowa into a single facility in Lake Forest, according to sources.
All of the activity has left the original developer and owner of A.J. West Ranch, Rusty Turner, wondering whether he should free up more space.
As it stands now, his Turner Development has reserved about 12 acres at the ranch for its own project.
But with the rest of the development selling out much more quickly than he anticipated and demand running high for land in South Orange County, Turner is considering putting the rest of the property on the market for around $8.3 million.
If he does that, he could miss out on long-term profits from the $25 million, 10-building low-rise office project Turner Development already has in the works.
“But the market is so hot right now and demand is so great,” said Turner, “we feel like we’ve got to sit back and take another look at our plans for that property.”
A final decision, he added, should be made within the next two months.
In the meantime, the Douglas Allred Co. expects to move forward with a five-building office campus on 19.83 acres. The company will use its own financing for the project, which it says is a typical size for its development portfolio.
Allred says his firm, which was started by his father more than three decades ago, also is developing industrial, office and apartment projects locally as well as in other markets.
The Douglas Allred Co. is finishing its $17 million Allred Irvine Center. The flex office park with 120,000 square feet is expected to be done by mid-May, and nine buildings of 17 are already under contract to be sold, according to Allred.
“We have an appetite for more in Orange County,” he said. “This a very exciting market and we continue to look at other opportunities.”
At A.J. West Ranch, Allred expects the five new office buildings to be taken by anywhere from one to three large tenants.
Lease rates haven’t been determined yet. But Griffin and Allred say the price tag for space in the new office complexes will be competitive with other projects in South Orange County. Current asking rental prices for similar types of buildings in the area are around $1.40 to $1.45 a square foot, according to brokers.
Allred also will have to consider several new projects coming to market in the area when making a decision on pricing.
One of those is Serrano Creek in Lake Forest. Birtcher Real Estate Group is targeting a September opening for its new project, which will include three low-rise buildings totaling 157,000 square feet along Lake Forest Drive.
Sources say that at least one large user, Western Digital, is talking to Birtcher about taking space at the site after its lease runs out in the Irvine Spectrum at the end of this year.
And just 1 1/2 miles from A.J. West Ranch, Trammell Crow is completing five new offices totaling 320,000 square feet. Like Allred’s project, the Pacific Vista development will involve two-story office complexes.
“They (Allred) will face different pricing factors than us,” said John Harty of Trammell Crow in Irvine. “By the time those guys open their doors, which would have to be more than a year from now, most of the new space coming online will be leased. So they will be competing for tenants much further out in the current business cycle than other developers.” n
Turner, Allred Busy Elsewhere, Too
The players in A.J. West Ranch’s final stages of development are moving on other fronts as well.
For Rusty Turner, the flurry of activity since the end of last year came after a slow start to the marketing of the 50-plus acre development. About six months ago, Turner Development was forced to switch brokerage teams, choosing specialists from Voit Commercial.
Despite increasing rental rates and land values, the new team along with Turner Development, was able to attract several high-profile tenants and developers in a highly competitive South Orange County market.
Now, Turner is ready to branch out in new directions with several additional projects.
“We are looking very hard at purchasing existing value-added properties where we can take buildings that are functionally obsolete and turn them around,” he said. “That’s going to be our thrust for the next 12 months. We’ve already bought one property and have made offers on several others.”
Turner Development has purchased the Freeway Business Center in the Irvine Business Complex. The three R & D; buildings, which are fully leased and total 40,000 square feet, were bought from CT Realty for $4.4 million.
Still out are offers by Turner Development for buildings in Long Beach and Anaheim. “And we’re actively looking for more,” said Turner.
The developer planning to build 350,000 square feet on A.J. West Ranch’s final frontier also is building its portfolio, although most of that activity is in different parts of the country.
The Douglas Allred Co. is under way with developing 1.5 million square feet of industrial buildings in Phoenix.
“We’ve done about 1 million square feet in that market during the last three years,” said David Allred, the company’s executive vice president.
The firm also has been active in the Jacksonville, Fla., area and is building homes in the $3 million to $4 million range in Rancho Santa Fe, near its San Diego base.
“Those are custom units that we do from time-to-time,” Allred said. “But those types of projects aren’t what we consider our main thrust.”
Commercial and industrial development, along with projects connected with different apartment markets, remains the focus of The Douglas Allred Co., he added.
Along those lines, Allred will be joining several other developers at its newest project in A.J. West Ranch. Other companies under contract to develop office and industrial space at the 50-plus acre Lake Forest masterplanned site include:
n Staybridge Suites Hotel. Turner Development has reached a tentative agreement with representatives of the chain interested in building a 118-room extended stay hotel for executives on 2.72 acres.
n David Pittman’s Acacia Properties in Newport Beach has been signed to a tentative development deal for three office buildings totaling more than 72,000 square feet.
n A partnership between Coastal Investment Properties’ owner Don Schisler and George Hedley, principal of Hedley Construction and Management in Newport Beach, is planning to build six office buildings at A.J. West Ranch. The complexes will be two stories each and range from 8,700 square feet to 12,000 square feet. The $11.4 million project will total 61,700 square feet.
n On a total of 5.5 acres, Peptite Medical Systems is planning to consolidate three operations in other parts of the country into one research medical center in Lake Forest.
