It’s a record price.
Boston-based investment adviser AEW Capital Management LP paid $117 million for twin six-story office buildings in Newport Beach, according to CB Richard Ellis Group Inc. The red-granite buildings, at 100 Bayview, are linked by a glass-topped atrium.
I wrote about it in June, before it had closed. But I can’t take credit for breaking the news. I learned about it from real estate newsletter Real Estate Alert. It pegged the sale price at $375 per square foot, just a hair high.
Even so, the actual price of $369 per square foot for the 317,376-square-foot property is a record for a major office building in Orange County, according to brokers.
Robert Smith and Michael Kane out of CB’s Newport Beach office represented the seller, a partnership of Laguna Hills-based Muller Co. and San Francisco’s Rockwood Capital Corp.
Prices for premium office buildings have been rising, surpassing the $300-per-square-foot mark last year. Key forces are pushing up prices: low interest rates, the prospect of higher rents due to a strong economy and a lack of construction.
Lackluster performance of stocks and low yields on bonds also make real estate look comparatively better.
Of course, higher prices mean lower capitalization rates, or yields, on real estate investments. Cap rates are strictly a measure of income a property generates versus its sale price,it does not account for debt payments.
The question is: How low can cap rates go?
When Real Estate Alert first thought the price was $119 million, only off by $2 million, it said the initial yield “would be just 6%, one of the lowest initial yields ever accepted by a buyer in Orange County.”
It used the term “initial” yield, since tenants with long-term leases often agree to rent hikes in time.
As a last note on Bayview’s price, part of its value came from being 92% full. It wasn’t always so full.
The building lured 24 tenants in two years, according to Brian Garbutt, a broker with Lee & Associates Commercial Real Estate Services Inc. in Newport Beach.
Garbutt leased 40% of the two buildings, he said.
Lease Deal
Newport Beach-based Investment Building Group has signed a 53,300-square-foot, five-year lease with Sterling Collision Center in Tustin.
Investment Building in June finished construction on a 114,500-square-foot building, according to Marc Berg, a vice president with the company.
The developer previously had bought the 6.1-acre site from Steelcase Inc. The Grand Rapids, Mich.-based office furniture maker used it as a parking lot for its nearby campus.
Steelcase later sold everything,with most going to Voit Development Co.,and moved to Industry.
Investment Building is marketing the remainder of its building, 61,200 square feet along Bell Avenue, for lease.
Jeff Mitchell, senior vice president in Voit Commercial Brokerage LP’s Irvine office, represented Sterling. Berg handled negotiations for his company.
Sterling is moving from another site in Tustin. The company is affiliated with Sterling BMW in Newport Beach. The Tustin site is for auto body repair for BMW and other luxury cars.
Management Coup
The Newport Beach office of PM Realty Group scored big earlier this month.
It nailed a property management contract with Glendale-based American Realty Advisors for 3.8 million square feet of office and industrial space, including 700,000 square feet in OC.
Houston-based PM is set to manage more than 900,000 square feet in Los Angeles, 200,000 square feet in San Diego and about 2 million square feet in the Inland Empire.
The deal brings PM’s Southern California portfolio up to more than 14 million square feet. And it marks PM’s entry into the Inland Empire.
“With our growing portfolio, we recognized that we needed a single consistent level of service in order to provide the best value to our investors and to ensure a reliable platform across our Southern California portfolio,” said Stanley Iezman, chief executive of American Realty, in a statement.
Lawyers Moving In
The Irvine Company may be losing one law firm at its classy Jamboree Center in Irvine, but it’s already signed another one.
Philadelphia’s Morgan, Lewis & Bockius LP has leased 13,000 square feet for five years at 5 Park Plaza. It has options for renewals and expansion, according to the firm.
In 2003, Morgan, Lewis took over the Irvine office of defunct Brobeck, Phleger & Harrison, giving it a foothold here.
Morgan, Lewis has moved its 12 attorneys and one paralegal, mostly focused on real estate, to Jamboree Center.
Last month Los Angeles-based law firm Gibson, Dunn & Crutcher LLP, currently at 4 Park Plaza, said it plans to move to a proposed tower at Park Place, just a few blocks down Jamboree Road.
The firm is set to lease 80,000 square feet from Los Angeles-based Maguire Properties Inc.
Gibson, Dunn is set to move in 2007.
