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The Michelson Sets New Mark

Toronto-based Manulife Financial Corp. has bought The Michelson office tower in Irvine in what’s believed to be the priciest single-building office sale ever in Orange County.

The financial services company, best known in the U.S. for its John Hancock Life Insurance Co. division, recently closed on the purchase of the 19-story Michelson, located in the Park Place mixed-use campus near John Wayne Airport at 3161 Michelson Drive.

The office, built in 2007 next to the San Diego (405) Freeway, was put on the market about five months ago.

Terms of the sale were not immediately disclosed. Sources familiar with the transaction said the 536,000-square-foot building traded hands for more than $500 per square foot, which would put the sale price near $270 million, if not higher.

The transaction appears to be Orange County’s most expensive commercial real estate deal of the year, exceeding the recent sale of the 1,572-room Hilton Anaheim, which is believed to have changed hands this summer for about $215 million.

No other single-building office properties in Orange County are known to have sold at a price above $200 million. Only a handful of larger area office properties have traded at prices about $400 per square foot in the past five or so years, let alone the $500-plus per-square-foot price estimated for the Michelson sale.

Manulife is taking over an office considered to be one of Orange County’s premier buildings. An A-list tenant base and low vacancy rates appear to have helped the institutional investor justify the steep sale price.

Tenants

Tenants at the building include Hyundai Capital America, which has its name atop the office; L.A. Fitness International LLC; Jacobs Engineering Group Inc.; and law firms Gibson, Dunn & Crutcher LLP, Greenberg Traurig P.A., Jones Day and Bryan Cave LLP.

The building is about 93% occupied, according to brokerage data.

Monthly rents at the building average about $3.33 per square foot, with a few tenants at the building paying in excess of $4 per square foot.

Operating Income

The property is expected to bring in net operating income ranging from $16.2 million and $18.8 million over the next three years, according to marketing materials used during the property’s sale.

The Michelson is the latest high-profile office addition to the real estate investment portfolio of Manulife, which counted $504 billion in assets under management as of June.

The company’s real estate portfolio runs more than 19 million square feet, with properties in Canada, the U.S. and Asia.

Manulife’s office portfolio in the U.S. totaled about 11 million square feet as of March. Prominent buildings it owns on the West Coast includes 865 South Figueroa, a 35-story office in Los Angeles; the 21-story Market Center offices in San Francisco; and Seaview Corporate Center in San Diego.

The company’s website lists one other Orange County office in its portfolio: 72 Corporate Park, a two-story office near the District at Tustin Legacy shopping center.

Several of the company’s larger office properties have the John Hancock or Manulife names attached to them. (It no longer owns the 100-story John Hancock Center in Chicago).

It’s not known whether The Michelson will see a name change following the sale. Calls to Manulife’s Los Angeles office were not returned.

The sale—brokered by Eastdill Secured, whose local operations are based in The Michelson, along with Orion Property Partners in Irvine—looks to have been a big money-maker for The Michelson’s prior owner, New York-based landlord Emmes Group of Cos., which bought the building in 2009 when it was about half full.

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 initially slated to hold the headquarters of defunct subprime lender New Century Financial Corp.—to Emmes in a move to shed debt.

Emmes paid about $160 million, or $300 per square foot, for the building, which it renamed The Michelson.

The property was the first investment in California for Emmes, a privately owned real estate investment company that made its name buying distressed assets during a prior down real estate market.

The company has since acquired one additional office property in OC, the two-building 4000 MacArthur complex in Newport Beach that holds the headquarters of chipmakers Conexant Systems Inc. and spinoff Mindspeed Technologies Inc. (see related story, page 3).

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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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