Hines Interests LP, which owns one parcel of land in Orange County worth about $12 million, has set a high goal for itself,to own $1 billion worth of buildings in the county within three years.
Houston-based Hines is set to open an office in Irvine this month. It hopes the local operation will be a base for acquisitions in OC and San Diego, where Hines plans to control another $1 billion in investments.
Douglas Holte, senior vice president, is heading the Irvine office. He helped to build up Hines’ holdings in Los Angeles and the Bay area.
Nationally, Hines owns all or part of 800 properties worth more than $11 billion. Its marquee development is Pennzoil Place in Houston, which includes two 36-story, trapezoid-shaped towers.
On its first OC project, Hines is teaming with Fort Worth, Texas-based Crescent Real Estate Equities Co. to develop a 260,000-square-foot office tower at 2211 Michelson Drive. The partners bought the 1.2-acre site in June.
Industry sources said the price of the land was $12 million.
Hines typically invests with partners in deals, Holte said. The company is one of the largest partners working on investments with the California Public Employees’ Retirement System, he said.
Hines and Crescent hired architect Paul Danna of DMJM Design in Los Angeles to draw up a tower that they see as being one of OC’s top buildings.
The caliber of the tower likely will be a notch below the Cesar Pelli-designed Plaza Tower owned by C.J. Segerstrom & Sons LLC in Costa Mesa,but not by much, Holte said.
“We aren’t sure the market needs something of that museum-quality,” Holte said of Plaza Tower. “We will be developing something very close to that but at market rents.”
Hines and Crescent are expected to start work on the $90 million tower in January, with completion set for spring 2007, Holte said. The partners are in the process of ordering steel, he said.
Kevin Hayes, chief executive of Cresa Partners LLC in Newport Beach, said Hines often taps high-end architects to design its buildings.
“One of the things that Orange County could use is a bit more emphasis on high design,” Hayes said.
Hines’ $1 billion ownership target here could hit some obstacles, including surging commercial building prices and competition from other investors.
George Economos, a senior vice president with NAI Capital Commercial Real Estate Services in Newport Beach, said the target is plausible but “it would require they come in very aggressive on price on all the bigger deals.”
OC now is luring national investors eyeing its strong economy and limited land supply, the broker said. The most sought-after properties can receive 10 offers, he said.
Other big investors are active here.
In June, New York-based Teachers Insurance and Annuity Association-College Retirement Equities Fund opened a real estate investment office in Newport Beach. TIAA-CREF is one of the largest private retirement investors.
Last year, New York-based developer Rockefeller Group International Inc. set up a West Coast operation in Newport Beach.
One other investor was close to hitting the $1 billion mark in record time.
Los Angeles-based Maguire Properties Inc. acquired about $900 million worth of buildings in OC in a little more than a year.
The real estate investment trust went from owning nothing here to having pieces of three trophy properties: Park Place and the Washington Mutual campus, both in Irvine, and Pacific Arts Plaza in Costa Mesa.
Last month Maguire sold part of its stake in the Washington Mutual campus to Australia’s Macquarie Office Trust as part of a $1.2 billion venture between the real estate investment trusts.
The Irvine Company, the county’s largest real estate owner, also could be a factor. In the past, the company has developed its own buildings here but recently has emerged as a buyer or bidder for key buildings.
