The Irvine Company’s billion-dollar Southern California office shopping spree has upped the ante for trophy buildings in Orange County and San Diego.
Last week, the Newport Beach-based company closed on its buy of a pair of San Diego office towers, including the city’s marquee One America Plaza.
When the Business Journal broke news of the impending sale in late January, the estimated price for One America Plaza and Koll Center was a combined $430 million.
By the time the deal for the towers closed, the tally was closer to $450 million, including cash and debt, according to government records in San Diego.
The sellers, GE Asset Management, the real estate arm of General Electric Co., and San Diego’s Sentre Partners, bought the towers in 2002 and 2003 for a combined $259 million.
One America Plaza went for about $520 per square foot. Koll Center, put up by Orange County developer Donald Koll in 1989, went for roughly $400 per square foot.
Other top San Diego buildings have been selling for closer to $350 per square foot.
Since 2003, the Irvine Co. has bought four other downtown San Diego buildings for about $550 million. The acquisitions give the company six of the 10 top towers in San Diego.
Along with two recent deals in OC, the Irvine Co. has spent close to $1 billion buying key office buildings in the past two months.
In January, the Irvine Co. bought Newport Gateway Center and Irvine Center Towers, both near John Wayne Airport.
Newport Gateway, two towers at 19800 and 19900 MacArthur Blvd., went for about $220 million, or $380 per square foot.
Irvine Center Towers, a four-building complex, sold for about $325 million, or $360 per square foot.
Behind the deals is a bet on rising rents.
“There’s a new sheriff in town,” said Jeff Manley, chief executive of Newport Beach-based Cresa Partners LLC, which represents tenants seeking space. “The Irvine Co. is not going to be bashful about raising rents.”
According to sources, at least one prospective tenant looking at Newport Gateway was told that monthly rents are going up by about 20 cents per square foot.
Average rents at the building are $3.13 per square foot, according to CoStar Group Inc.
The move would push asking rents closer to the $3.50 per square foot mark that the Irvine Co. reportedly is seeking at two office towers it’s building in the Irvine Spectrum.
Fueling Sales Market
The buys have fueled an already hot market for office buildings.
Based on recent sales, the value of key office towers around the airport has increased about $60 per square foot, or 16%, in the past two years.
In 2004, the highest price paid for an OC office building was about $320 per square foot.
That came when Knobbe, Martens, Olson & Bear LLP outbid the Irvine Co.,its former landlord at Newport Center,for the Irvine high-rise that serves as the law firm’s headquarters.
The firm, which focuses on intellectual property, paid an estimated $100 million for the 308,000-square-foot tower on MacArthur Boulevard and Main Street.
Knobbe, Martens exercised a clause in its lease to buy the building to avoid rising rents, sources said at the time.
The Knobbe tower now is worth at least $120 million,or $390 per square foot.
Two potential buyers recently made offers, one in writing, a source at Knobbe said.
The Irvine Co. is believed to be behind one of the bids, according to sources. The company declined to comment.
“We explained that we were not interested in selling at this time,” the Knobbe source said. “We bought it as a long-term headquarters.”
Even so, “there is some price which could not be refused,” the source said.
