2002 Property Deals to Reach $1 Billion
Orange County is on track to bring in $1 billion worth of real estate investment this year, industry sources say.
Atypical sources,including Wall Street refugees and private investors,are credited with helping to top 2001’s investment tally by as much as $200 million.
“More money is coming in from people who normally would be investing in the stock market,” said Mark Larson of the investment properties arm of CB Richard Ellis Services Inc. in Newport Beach.
Larson and CB broker Gary Stache said they are enjoying their best year on record.
Not bad in what has been a down year overall for real estate, with development stalled and office vacancy at 14%.
A big factor: low interest rates.
“There also is a sense of urgency to invest now before interest rates increase,” wrote Cushman & Wakefield Inc.’s Stephen Somer and Ryan Smith in a recent report.
Sales of smaller buildings,50,000 square feet and smaller,have dominated investments. In many cases, entrepreneurs and small businesses going from tenants to owners have driven sales. In others, small investors have bought buildings as part of 1031 exchange deals in which they defer capital gains on other property deals.
There have been big deals, too.
Three recent sales of class A office buildings near John Wayne Airport brought about $350 million of this year’s investment total.
They include: Park Place in Irvine, which fetched $198 million; 4400 MacArthur Blvd. in Newport Beach, which sold for $98 million; and Newport Corporate Tower at $40 million.
Investment has rebounded from a low following the terrorist attacks.
“Rates and market performance just after the World Trade Center attack were one of the most uncertain times in our investment history,” Somer said.
From Sept. 11, 2001, to April, money trickled back into the stock market, Somer said. The Dow Jones Industrial Average rose 12% and the S & P; 500 rose 3.4%.
But since April, the Dow has fallen 27% and the S & P; 30%. Money has steadily flowed back to real estate where capitalization rates,used by investors to help make decisions about real estate deals,have inched downward. They’re now at 8.5% to 9.5%.
“Those numbers drop even lower for large trophy assets or assets with credit and term supporting the leases,” Somer said.
,Daniel D. Williams
