Boston’s AEW Capital Management LP made one of the splashiest Orange County office buys in 2005, paying $117 million for Bayview Corporate Center, a pair of six-story office buildings in Newport Beach.
The complex went for about $370 per square foot, which at the time was a record for an office sale in the county.
Now AEW is turning its sights to the local industrial market. And it’s again paying top-dollar.
The company just paid $32.5 million to buy a 307,781-square-foot industrial building in Foothill Ranch from Northwestern Mutual Life Co.
The building, at 50 Icon, has two tenants. It is home to the headquarters of Hampton Products International Corp., a maker of home hardware and lighting products, as well as Uline Shipping Supplies, an Illinois-based distributor of packing materials.
The capitalization rate on the deal: about 5.75%. That’s about as low as you’ll see in an industrial deal, said Louis Tomaselli, senior vice president for Voit Commercial Brokerage LP, which represented both parties. Voit’s Mitch Zehner and Trent Walker also worked on the deal.
That low of a cap rate has some local investors scratching their heads, wondering if the area’s industrial market is about to see a major upswing in rents.
“There’s a lot of capital flooding the market,” said Rob Neal, executive vice president of Newport Beach-based Hager Pacific Properties. “For properties (trading) in the mid fives, you have to ask yourself if that’s safe enough.”
50 Icon: sold for $32.5 million, cap rate of 5.75%
AEW sees higher rents in OC coming, said Scott Holmes, vice president of acquisitions for the investor. The 3-year-old building in Foothill Ranch is particularly appealing because of its newness and because the industrial market in the region is built out.
The company typically holds investments for at least 10 years.
The sharks, or the lawyers, at least, are circling around Impac Mortgage Holdings Inc.
After announcing a sharp reduction in its fourth-quarter dividend earlier this month, the Newport Beach-based real estate investment trust saw its shares take a hit. They’re now near a 52-week low, giving the company a market value of about $700 million.
Impac’s directors OK’d a dividend of 20 cents, down from 45 cents for the prior quarter and 75 cents a year ago.
The company blames rising short-term interest rates and more mortgage prepayments for a drop in earnings. Impac buys mortgages. As a REIT, it is required to pass through most of its profits to stockholders as dividends.
Now Impac is being hit by at least seven class-action lawsuits, which charge the company with misrepresentation by the REIT’s executives earlier last year.
The lawsuits, ostentatiously filed on behalf of those who bought Impac’s stock between May and August, argue that previous quarterly guidance concealed Impac’s true financial standing.
NIMBYs Worry Developers
Lawsuits could be an eventual end-result of all the residential and mixed-use construction taking place and planned for the Irvine Business Complex near John Wayne Airport.
That’s according to participants at a recent real estate forum held at the University of California, Irvine.
Developers and urban planners fear that plans to add thousands of condominiums to the area,long a hub for offices and industrial buildings,could create a culture clash.
New residents could chafe at late-night trucks and other inconveniences brought upon by businesses in the area, said Dennis Cavallari, senior vice president and partner at Foster City-based Legacy Partners.
“I don’t think residential and industrial are compatible,” he said.
As condos get built, residents will have to “remember that they are the guest of the businesses at the core of region. This is a business complex,” said Brandon Birtcher, president of Irvine-based Birtcher Development & Investment Co.
Those reminders soon could be forgotten. Lawsuits from residents may be unavoidable, panelists said.
The event was sponsored by the Center for Real Estate at UC Irvine’s Paul Merage School of Business. The recently launched center has raised $2.5 million in pledges to date, according to executive director Kerry Vandell.