The Irvine Company is close to finalizing a deal to buy twin Newport Beach office towers near John Wayne Airport, according to sources close to the deal.
The Newport Beach-based company, which has an increased interest in buying office buildings of late, could pay top dollar for Newport Gateway Center, two 14-story towers at 19800 and 19900 MacArthur Blvd. at Jamboree Road.
The sale price is expected to be in the $215 million to $220 million range for the two buildings, which have a combined 571,566 square feet of space.
That would put the buy at $375 to $385 per square foot,a potential record for Orange County office building sales. Other airport office towers have sold for as much as $370 per square foot.
Irvine Co. officials declined to comment.
A deal still could fall through. If the Irvine Co. ends up with the towers, it would be the company’s first local buy of an airport-area office complex. Until recently, the company has developed buildings in Orange County while buying in Silicon Valley, Los Angeles and San Diego.
Active Bidding
For the past year or so, the Irvine Co. has been cited by brokers as a bidder on some high-profile office buildings, including a Main Street tower that’s home to law firm Knobbe, Martens, Olson & Bear LLP. It’s also rumored to have bid on Irvine Center Towers at Von Karman Avenue and Michelson Drive.
Last year, the company bought the Irvine Spectrum office campus of Verizon Wireless, a unit of New York-based Verizon Communications Inc.
The Irvine Co. has bought office high-rises in Los Angeles and San Diego, where it owns four downtown towers.
The appeal of Newport Gateway: The buildings are 97% full with rents on the rise. Britain’s Equitable Life Assurance Society is the current owner, according to Thomas Murphy of Jones Lang LaSalle Inc., the agent for the buildings.
Sources close to the pending sale said the Irvine Co. recently topped several local and national companies in early bidding for Newport Gateway. One was Newport Beach-based Olen Properties Corp.
Olen Properties made a splashy entry into the airport office market about a year ago, buying a pair of 13-story towers on Main Street for more than $100 million.
At the time, Igor Olenicoff, president of Olen Properties, said it was the first of several high-rises the company intended to buy.
‘Beauty Contest’
Olenicoff said last week his company was a finalist for Newport Gateway. Olen Properties’ last bid for the buildings was $221 million, or about $387 per square foot, he said.
“We were in there at almost the same price, but it looks like we were an hour behind (the Irvine Co.),” Olenicoff said. “It ended up being a beauty contest. It’s always a mystery as to who will win those.”
A selling price near $400 per square foot would be a high-water mark for the county.
The biggest office deal in recent years was Boston-based AEW Capital Management LP’s $117 million buy last year of Bayview Corporate Center in Newport Beach. The office complex went for $370 per square foot.
Newport Gateway’s monthly rents are about $2.95 per square foot and are up 18% in the past year.
The capitalization rate for the deal likely is low, close to 3%, according to Olenicoff. Prestige and rising rents likely are the driving factors for bidders.
“This property is not being sold on any cap rate,” Olenicoff said.
Newport Gateway tenants include law firms and other professional tenants. Toshiba America Electronic Components Inc., the chip arm of Japan’s Toshiba Corp., moved into one tower in 2004, taking up three floors (see related cover story, “Toshiba Chip Unit Is Back”).
