The sale of a big real estate portfolio is set to enter a critical phase this week with real estate mogul Donald Bren among the finalists.
Bren’s The Irvine Company is among a handful of prospective buyers for the portfolio of Los Angeles-based asset manager CommonWealth Partners LLC. The 30 office buildings in five states could go for $1.5 billion or more.
“Yes, we have ex-pressed an interest in this portfolio,” said Larry Thomas, spokesman for the Irvine Co. “But we are finalizing our due diligence before we decide to submit a bid.”
The buy would be the biggest yet for the Irvine Co. and would be a big leap in the Newport Beach-based company’s ongoing effort to expand beyond Orange County.y
Interestingly, the move would bring Bren into the realm of a local real estate rival,the Segerstrom family of Costa Mesa.
Pacific Arts Plaza, a four-building complex next to South Coast Plaza, is among CommonWealth’s buildings.
The Irvine Co. and others have gone through an initial qualification process and could submit bids early this week, according to real estate sources.
Others that could submit bids include Chicago-based Equity Office Properties Trust, Houston-based Hines Interests LP and New York’s J.P. Morgan Chase & Co.
The CommonWealth portfolio is owned with the California Public Employees Retirement System and New York-based The Rockefeller Group International Inc.
CalPERS initiated the sale to take advantage of rising office prices and to turn its attention to new deals, a source said.
The pension fund and CommonWealth may hold on to land zoned for development, including a proposed high-rise office building in Costa Mesa.
Bren has bought marquee buildings in Los Angeles and San Diego, but nothing on the scale of the CommonWealth sale. Such a buy would amount to the biggest deal for him since taking control of the Irvine Co. in the 1980s.
The Irvine Co. owns nearly 30 million square feet of commercial real estate, including 350 office buildings, 32 shopping centers and two hotels. Most are in OC.
In 2003, Bren paid $134 million for Symphony Towers in downtown San Diego. In 2000 he anted $350 million for Century City’s Fox Plaza. He also owns apartments and offices in Silicon Valley.
Along with cash from operations, the company has access to credit lines that it could tap to fund a buy of the CommonWealth portfolio, a source said.
Bren reportedly offered $100 million for a high-rise office building in Irvine last year. But law firm Knobbe, Martens, Olson & Bear LLP, the building’s main tenant, exercised a right in its lease to match the bid.
The law firm paid top dollar for the 308,000-square-foot tower on the corner of MacArthur Boulevard and Main Street.
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Pacific Arts Plaza: in heart of Segerstrom empire |
And the Irvine Co. still could be trumped on the CommonWealth portfolio. Bidding is expected to go on beyond this week, sources said.
The portfolio includes the 53-story tower at 777 S. Figueroa St. in downtown Los Angeles and three high-profile office buildings in Glendale.
CommonWealth also owns four office buildings in Costa Mesa near South Coast Plaza, which total nearly 800,000 square feet of prime real estate on Anton Boulevard.
They make up a 19.2-acre campus, dubbed Pacific Arts Plaza. Eateries and a sculptured garden by famous designer Isamu Noguchi are included.
The campus includes zoning for a proposed 18-story, 400,000-square-foot office building.
“It’s certainly considered a class A asset,” said Robert Griffith, a senior vice president in the Newport Beach office of Grubb & Ellis Co. “It would be generally in the same category of some of the more recent sales.”
The buy would bring the Irvine Co. into the backyard of another pivotal real estate figure here, Henry Segerstrom, managing partner of Costa Mesa-based C.J. Segerstrom & Sons.
Pacific Arts Plaza is in the heart of the Segerstrom family’s holdings. The family owns three high-rises nearby as well as South Coast Plaza shopping center.
Bren’s local holdings are concentrated in Irvine and Newport Beach. He owns the Fashion Island shopping center in Newport Beach and controls much of the 5,000-acre Irvine Spectrum office complex and all of the shopping center there.
The most recent sales of top-tier office buildings here have been for $291 to $325 per square foot, according to brokers.
Grubb’s Griffith said the Costa Mesa office buildings are sure to sell in the same range, likely more than $300 per square foot.
One reason sale prices are on an upswing is because they include anticipated rental rate hikes in the future, he said.
“As the economy continues to move forward, some of these assets will improve their operating performance,” Griffith said.
Knobbe, Martens’ $100 million-buy of its Irvine headquarters amounted to about $320 per square foot.
Andy Fixmer of the Los Angeles Business Journal contributed to this report.
