There was some high drama in real estate circles during the past few weeks.
For a matter of days, The Irvine Company was among those interested in buying a portfolio of 30 office buildings in five states put up for sale by Los Angeles-based asset manager CommonWealth Partners LLC. CommonWealth reportedly is asking for $1.5 billion or more.
The deal would have been the biggest for Donald Bren since taking control of the Irvine Co. in the 1980s.
Another dramatic element: The portfolio includes Pacific Arts Plaza in Costa Mesa,four prime office buildings right next to the holdings of another Orange County real estate tycoon, Henry Segerstrom.
But, alas, after going through an initial qualification process, Bren opted not to bid.
“We think that it’s a very attractive portfolio, but for reasons we decline to discuss, we’ve decided not to submit a bid,” said Irvine Co. spokesman Bill Rams.
It would have been a great story. Now it’s just an interesting case study.
Industry sources, who asked not to be named, let slip some details of the deal so far.
CommonWealth owns the portfolio with the California Public Employees Retirement System and New York-based The Rockefeller Group International Inc.
The sellers hired Secured Capital Corp. to market the portfolio, which includes the 53-story tower at 777 S. Figueroa St. in Los Angeles and three high-profile office buildings in Glendale.
Word is Secured Capital in early January asked potential buyers if they could swing at least $1.5 billion for the collection.
Only a few buyers said yes, including the Irvine Co.
Official bids were due the following week, on Jan. 18. That’s when the Irvine Co. bowed out.
With Irvine Co. officials tight lipped, I’m left to speculation as to why they didn’t bid.
The most obvious and logical guess: The price was too high.
Class A buildings are selling at a premium. Low interest rates mean debt is cheap, so buyers are accepting lower returns on office properties. Plus, buyers see economic numbers improving and think office lease rates should be rising soon.
Oh, and the stock market began 2005 with a whimper, making real estate comparatively more attractive.
Bren’s bid top dollar before. He was widely rumored to have offered $100 million for a high-rise office building in Irvine last year. But law firm Knobbe, Martens, Olson & Bear LLP, the main tenant, matched the bid,a right granted by their lease.
Some of CommonWealth’s buildings are in Arizona, Colorado, Hawaii and Texas. The Irvine Co. has expanded beyond OC in recent years, but stayed in California. Its workers, aside from those in property management, are heavily concentrated in Newport Center next to Fashion Island.
If Bren expands beyond the Golden State, and especially if he thinks of developing in other markets, he’ll have to contend with a new level of logistics.
On Friday, Los Angeles-based Maguire Properties Inc. said it struck a deal with CommonWealth to buy the portfolio for $1.5 billion. The sale is expected to close this quarter.
Maguire beat out several prospective bidders, including New York’s J.P. Morgan Chase & Co., who some considered the main contender.
Lomas in Petaluma
Fullerton-based Lomas Development LLC next week should take another shot at selling Petaluma’s Planning Com-mission on its proposal to transform a quarry into 314 homes.
In November, when commissioners said they needed more time to study Lomas’ plan, a company representative requested an immediate yes-or-no vote. He got a no.
The former quarry, south of Petaluma, was run by San Rafael-based Dutra Group.
Lomas’ Larry Lazar said in a letter to the city that his company is prepared to work with Petaluma officials on a review of the project.
On Feb. 8, planning commissioners are set to scrutinize the site’s geotechnical studies. The City Council should discuss the project the following week.
Lazar also is an executive with Irvine-based developer SunCal Cos.
Over in Hawaii
The OC offices of two developers hope to build a Cancer Research Center for the University of Hawaii.
The Costa Mesa office of Washington, D.C.-based CarrAmerica Realty Corp. and the Orange office of Brookfield, Wis.-based Hammes Co. are among 14 companies wooing the university.
The center could be up to 360,000 square feet on the Kakaako waterfront. It’s proposed for a vacant 5.5-acre site owned by the Hawaii Community Development Authority, a state agency charged with redeveloping Kakaako.
The university seeks a developer to coordinate finance, planning, design, construction and management.
Interested companies have submitted qualification statements. University officials are set to review them and shorten the pool to three to five developers or development teams.
