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LA Fitness HQ Set for Move to Park Place

3161 Michelson: now 93% full

Irvine-based fitness center operator L.A. Fitness International LLC will move its headquarters a few blocks to one of the higher-end office buildings in the John Wayne Airport area.

The growing health club chain last week announced it had signed a 10-year lease for 91,023 square feet of space at the 3161 Michelson office tower in the Park Place mixed-use campus.

The deal is one of the larger relocations announced in Orange County’s office market over the past year.

It’s also is a sizeable step up in office space for LA Fitness, which operates more than 500 fitness clubs across the country.

The company had been leasing about 60,000 square feet of space at the 2600 Michelson office tower, located on the opposite side of Jamboree Road near the San Diego (I-405) Freeway.

LA Fitness has been in a growth mode of late. In December the privately owned company paid $153 million for 171 fitness clubs in 16 states operated by rival chain Bally Total Fitness.

Extra Room

The new space also allows for some extra room for future growth, according to brokers who worked on the deal.

LA Fitness saw about $1 billion in revenue in 2010, according to trade publications.

The company is majority-owned by a trio of private equity firms: CIVC Partners and Madison Dearborn Partners of Chicago, and Siedler Equity Partners of Marina del Rey.

The lease is a big win for New York-based landlord Emmes Group of Cos., which bought the 19-story Michelson tower in mid-2009 when it was about 60% leased.

The building is now about 93% leased, according to the landlord.

Other tenants at the building include Hyundai Capital America, which has its name atop the office, Jacobs Engineering Group Inc., and law firms Gibson, Dunn & Crutcher LLP, Jones Day and Bryan Cave LLP.

$2.50-$2.90

Terms of the deal weren’t disclosed. Tenants have been signing leases at the building for monthly rents in the range of $2.50 to $2.90, according to brokers.

The high-end building, which was built in 2007 at a reported cost of nearly $260 million, was expected to get rents of about $4 per square foot when it was going up.

The tower—originally called 3161 Michelson—was built by Los Angeles-based Maguire Properties Inc., which now operates under the MPG Office Trust Inc. name.

Maguire sold the tower—which was originally slated to hold the headquarters of defunct subprime lender New Century Financial Corp.—to Emmes in a move to shed debt a few years after the building opened.

The Los Angeles-based real estate investment trust has since shed a number of other buildings at the Park Place campus, in addition to numerous office buildings across the county.

LBA

Irvine-based LBA Realty now owns a bulk of Park Place’s remaining offices and is undergoing an estimated $40 million renovation of the campus. There’s been talk of LBA adding a health club to the Park Place.

Following its lease at the Michelson tower, a LA Fitness club would appear to be a natural fit for the site.

LA Fitness is no stranger to taking advantage of office space left behind by subprime lenders.

The company moved from the Irvine Spectrum to the 2600 Michelson building in mid-2007, taking over three floors in a sublease of space from Orange-based ACC Capital Holdings Corp., parent of defunct subprime lender Ameriquest Mortgage Co.

The initial sublease ran through the end of 2010.

In mid-2010 LA Fitness announced it had signed an extension at the building, which also was previously owned by Maguire, but was operating out of receivership at the time.

That renewal was slated to run for five years.

Sublease

LA Fitness expects to move to the Michelson tower later this year. The company’s expected to put its current headquarters up for sublease.

The company’s planned departure appears to eliminate the largest tenant at the 16-story 2600 Michelson building, which traded hands last year in a $70 million lender-driven deal.

Santa Monica-based Ocean West Capital Partners teamed up with other investors to buy the 308,000-square-foot 2600 Michelson tower from New York-based Torchlight Investors, a special servicer for distressed commercial loans, for nearly $230 per square foot.

The building now is about half full, according to CoStar Group Inc. data. Monthly asking rents for the building are listed at about $2.25 per square foot.

Bob Thagard of Irvine-based Orion Property Partners Inc. represented LA Fitness in the latest transaction, while Emmes represented itself.

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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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