Orange-based ACC Capital Holdings Corp., parent of Ameriquest Mortgage Co., is putting as much as 600,000 square feet of office space on the market.
The move comes amid a restructuring that includes cost-cutting and layoffs at the company’s subsidiaries, including Ameriquest, the country’s largest maker of home loans to borrowers with imperfect credit.
ACC Capital is one of the largest tenants in Orange County, having leased close to 1.5 million square feet of space at its peak.
In November, ACC Capital said it was cutting 1,500 workers as rising interest rates cut into loan volume. Then in May, Ameriquest said it was shuttering about 230 retail branches and laying off 3,800 more workers.
ACC Capital has told local real estate brokers that it wants to sublease the office space. The company’s leases at these offices run through 2009 and 2011.
The space is spread across eight buildings in Irvine, Anaheim and Orange.
The buildings include a number of high-profile towers in the John Wayne Airport area: two buildings at The Irvine Company’s Jamboree Center, two buildings at Olen Properties Corp.’s Century Centre towers and at Equity Office Properties Trust’s 2600 Michelson tower.
There’s about 400,000 square feet up for sublease at those five buildings.
ACC Capital unit Argent Mortgage, which funds loans generated by brokers, has its name atop two of these buildings, at Jamboree Center and Century Centre.
If Argent leaves these buildings, the prospect of snagging the rights to prominent signs, which face the San Diego (I-405) Freeway, could lure tenants.
Also being shopped: buildings in Anaheim and Orange, including 127,750 square feet at Trammell Crow Co.’s Arena Corporate Center, next to the Arrowhead Pond in Anaheim.
Some office space had been expected to come back on the market after Ameriquest announced its restructuring in early May. Some of the office space up for sublease has sparse ACC Capital staff, following the recent layoffs.
That all of the space went on the market at once raised some eyebrows.
“I was surprised to a degree that it all went at one time,” said Barry Gail, senior director for the Irvine office of Cushman & Wakefield Inc. “Along with the ConAgra space, this could provide a little tremor in the industry.”
(See related story on ConAgra Food Inc.’s plan to vacate 260,000 square feet of space, page 3.)
Evaluating Plans
How much of the 600,000 square feet ACC Capital is ultimately willing to part with isn’t clear. The combined space could host close to 2,800 workers in total, according to marketing material from brokers.
There’s a good chance ACC Capital could decide to sublease only the space where it gets the best offers. It may choose to push subleasing on the longest leases and hold on to the rest of the space, brokers said.
Another option is for ACC Capital to sublease what it can during the next few months, and terminate most of the remaining leases, absorbing penalties in the process.
It’s believed that the mortgage lender previously negotiated the right to terminate leases at most of the buildings, Gail said.
Another option is for a bullish landlord to buy out the rest of the company’s lease and work directly with prospective tenants, who would likely sign on at higher lease rates.
Landlords then would get to make deals with tenants they want at the rates they want, said Jeff Manley, chief executive for Newport Beach-based Cresa Partners LLC, which represents tenants in leases.
ACC Capital officials said that while the company is giving up space locally, it also plans to grow operations at its consolidated regional sites. The company is being represented by broker John Gillespie of Newport Commercial Realty Advisors.
Few in the industry believe landlords affected by ACC Capital’s subleasing plans are overly concerned.
“We are working closely with ACC to accommodate their new space needs,” said Bert Dezzutti, senior vice president and head of OC operations for Chicago-based Equity Office Properties. “The company is a valued national customer. We approach our relationship from a long-term perspective.”
ACC’s headquarters in Orange, which isn’t part of the sublease plan, is in an Equity building.
OC’s office market is in great shape by most measures.
The overall vacancy rate for the county’s 93 million square feet of office space was 6% in the first quarter, down from 9.5% a year earlier, according to CB Richard Ellis Group Inc. The average lease rate was $2.29 per square foot in the quarter, up from $2.05 a year ago.
If all 600,000 square feet were vacated, the amount of empty office space in OC would rise by 11%.
The vacancy rate would rise 60 basis points to 6.6%,still a historically low rate. But with other mortgage lenders also paring workers, the cumulative effect could start to add up.
The size of office space being put up for sublease by ACC Capital in the airport region ranges from 9,600 square feet to 130,000 square feet, with lease lengths ranging from 2.5 years to 4.5 years.
It could be tougher than usual to find tenants to sublease space that only runs through early 2009.
Companies willing to sign on for just a couple years at a time mainly have been mortgage companies. With the sector slowing and other companies also giving back space, few mortgage company takers may be available, Gail said.
Competitive Rates
Asking lease rates for ACC Capital’s space in the airport area ranges from $2 per square foot to $2.25 per square foot,well below going rates for the area.
The average class A rent around John Wayne Airport was $2.49 per square foot last month, according to CB Richard Ellis.
If a tenant subleases space for more than what it had been paying, typical leases call for the tenant and landlord to split the profits, said Bruce Schuman, senior vice president for the Irvine office of Studley Inc.
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