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Kilroy Was Here? Investor Could Prune OC Portfolio

A former industrial property near John Wayne Airport that’s currently on the sales block might not be the only Orange County property put up for sale by Los Angeles-based Kilroy Realty Corp. in the not-too-distant future.

In a story in the Nov. 21 Business Journal, land brokers noted that the real estate investor was shopping a recently razed, 9.1-acre site along Von Karman Avenue for sale to apartment developers.

The property, which formerly held an older, 160,000-square-foot industrial building, is expected to fetch about $30 million, according to brokers familiar with the sale. The site is expected to hold a 469-apartment complex once it is redeveloped.

A few more area sales are possible, Kilroy officials said last month in their quarterly call with analysts.

Officials for the investor, which owns West Coast office and industrial properties totaling about 15.2 million square feet, said they had “a few odds and ends” in the area around the Irvine Spectrum that they don’t consider core properties and might also look to sell. Kilroy’s financial documents indicate the company owns just one property in the Spectrum—111 Pacifica, a 67,500-square-foot office just off Irvine Center Drive that’s about 86% leased.

The three-story building isn’t for sale, according to CoStar Group Inc. records.

But based on other area sales of late, the building likely would command a price of around $12 million if it were sold.

The company’s two other Irvine properties are 2211 Michelson—a recently built tower near John Wayne Airport that Kilroy bought last year for $103 million and isn’t expected to sell—and 2055 Main Street, a 47,500-square-foot light manufacturing building that’s also near the airport and isn’t listed for sale.

Market watchers are also keeping a close eye on Kilroy’s sizeable local industrial portfolio, which is largely based in Anaheim, Brea, Garden Grove and Santa Ana. That portfolio is largely full, and isn’t considered to be a long-term focus of the company, which has no real industrial presence in any other West Coast market, according to local sources.

Kilroy’s companywide industrial portfolio totals about 3.6 million square feet, and all but one of those buildings are in OC.

“If we sell industrial, it will be in OC,” an official said last month.

Lab Lawsuits

The scrapped redevelopment of a historic warehouse building in Portland, Ore., has led to litigation between the city’s redevelopment agency and Costa Mesa-based Lab Holding LLC.

Lab Holding President Shaheen Sadeghi recently filed suit against Portland’s urban renewal agency for more than $1.7 million, after a proposal to remake the city’s Centennial Mills building abruptly fell apart this year, according to a report in The Oregonian newspaper.

Centennial Mills is a closed waterfront warehouse in Northwest Portland’s Pearl District, overlooking the Willamette River. It previously served as a mill and wheat processing facility. The city’s redevelopment agency bought the property in 2000, with plans to remake the site into, as The Oregonian described it, “a nationally recognized foodie hub.”

In 2008, the city development commission began negotiating with Lab Holding, developer of Costa Mesa’s The Lab and The Camp anti-malls, for a similar concept at Centennial Mills, turning the site into a mix of local businesses and restaurants, as well as an organic produce market.

The plans broke down earlier this year. According to The Oregonian’s description of the lawsuit, Sadeghi argued the city changed requirements at the last minute, away from a food-centric focus and toward office space.

He’s asking for $1.7 million to recover planning, development and consultant fees, and claims the redevelopment agency made false representations, and breached its contract with the developer.

The redevelopment agency is reported to have already spent at least $12.5 million for the property, and is looking to find a development partner to replace Lab Holding.

The Portland lawsuit is the second big legal action that LAB Holding is involved in.

Closer to home, the developer’s also sparring with the city of San Clemente over the proposed Playa del Norte project, a 48,970-square-foot restaurant and retail development the company has been working on in that city’s North Beach area.

Voters rejected the plan earlier in the year, but the developers are trying to get that referendum overturned in the courts.

Lab Holding also has filed a lawsuit against the city of San Clemente regarding the failed plans, alleging the city acted in bad faith in the run-up to the referendum, in effect sabotaging the project. The suit, filed early last month, seeks up to $3 million in damages.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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