A rich Salt Lake City businessman is said to be in escrow to buy the former Newport Beach headquarters of failed savings and loan operator Downey Financial Corp.
Commercial real estate sources point to Khosrow Semnani, a Utah resident who made his fortune in the environmental and waste disposal business, as heading up the winning bid for the Bayview Corporate Center office buildings.
The bid is believed to be close to $50 million, according to brokers not directly involved in the deal.
If correct, that’s about a 15% discount from the office’s most recent asking price of $59 million—and more than 50% below what the building was being marketed for less than a year ago.
The buildings are being sold by the Federal Deposit Insurance Corp., which seized Downey’s assets in late 2008 after the thrift operator failed amid bad loans.
Semnani has some Southern California real estate ties. He’s said to be affiliated with LAT Investment Corp., a Los Angeles-based commercial real estate business.
LAT Investment appears to own at least one Southern California office, near Los Angeles International Airport on Century Boulevard. The company is not known to own any Orange County buildings.
Semnani is better known as the founder of Salt Lake City-based Envirocare, a toxic and nuclear waste disposal company he sold in 2004 for an undisclosed price. Envirocare now is part of EnergySolutions Inc., the largest nuclear waste company in the U.S.
Iran-born Semnani is reported to be one of the wealthiest non-Mormons living in Utah.
Salt Lake City’s Deseret News estimated his wealth to be more than $100 million in 2002, two years prior to Envirocare’s sale. He arrived in the U.S. penniless about 40 years ago.
Gathering a Team?
Semnani’s company is said to be interviewing potential leasing and property management teams for the Bayview buildings, in anticipation of the deal closing.
The deal for the Bayview offices—near Jamboree Road and South Bristol Street—still has yet to close, sources said.
Rumors are nothing new to the Bayview property. Speculation has swirled for months, with several area businesses, investors and landlords rumored at various points to be buyers—and potential tenants—for the largely empty building.
Part of the interest in the sale is due to the FDIC’s involvement, a first for a big OC commercial property during the recent downturn.
Locals see the deal as having the potential to set the bar for the high-end of the local office market, which has seen sluggish sales in the past 18 months.
As much as 5 million square feet of office space in OC, much of it distressed, will trade hands by the end of this downturn, said Kurt Strasmann, managing director of the Anaheim Metro office for Newport Beach’s Voit Real Estate Services.
A deal by investors such as Semnani isn’t unexpected, according to local brokers.
Wealthy investors from outside the area who understand the fundamentals of OC’s office market are increasingly expected to be involved in deals here, buying buildings for a fraction of what they sold for a few years ago.
“You are going to see more buyers like this—buyers you’ve never heard of before,” Strasmann said.
“Very high-quality properties like this don’t come along too often. Buyers will benefit—if they can carry it for the long term,” Strasmann said. “There’s still going to be another 12 months of pretty tough times.”
The rumored price for the sale is below the FDIC’s asking price, yet above what many locals think the property’s worth, due to high levels of empty space.
The Bayport offices, which total about 320,000 square feet, are about a third full after what was left of Downey’s operations there were taken over by Minneapolis-based U.S. Bancorp and moved to Irvine.
Los Angeles-based CB Richard Ellis Group Inc. now is the biggest tenant at Bayview.
State of Market
Overall, the local office market has a vacancy rate of about 18%. Most industry watchers expect vacancy rates to continue inching up for at least another year.
Semnani’s bid is believed to be between $150 and $155 per square foot, according to brokers, putting the bid at around $50 million.
The listing price for the building, which counts two six-story office towers connected by a three-story atrium, is about $59 million.
Before the FDIC seized Downey’s assets in late 2008, Downey had been shopping the building for about $115 million.
A nearly identical property next door to Downey’s twin buildings, at 100 Bayview, sold for $117 million in 2005. It was the most expensive office sale of that year.
