Financial troubles at Phoenix-based Opus West Corp. and one of its sister companies is training a brighter spotlight on the office and condominium developer’s Orange County buildings.
Speculation has grown in the last few weeks that some or all of the developer’s recent Irvine developments,which include an office tower and a trio of high-rise condominium buildings,are in financial straits.
The developer opened a 314,074-square-foot office tower at 2050 Main Street in 2007. The building’s the final tower planned for the Opus Center Irvine campus along the San Diego (I-405) Freeway near John Wayne Airport.
The 13-story tower is about 37% full, according to market tracker CoStar Group Inc. That’s at the low end of occupancy for Irvine-area office towers that have opened their doors in the past few years.
The five other office towers that opened in Irvine near the same time as 2050 Main Street have occupancy rates running from about 40% to 75%, according to CoStar.
Opus West also built three 15-story high-rise condos and a retail plaza near the intersection of Jamboree Road and Campus Drive in Irvine, in a partnership with Scottsdale-based Geoffrey H. Edmunds & Associates Inc.
The last of the three condo towers opened last August,at the time it was said to be about 50% sold, according to the developers.
Since then, Opus,like most area commercial developers,has stopped plans for any new projects, and it has instead focused on leasing up and selling homes at its existing properties.
There’s been no evidence or court records yet of any of the Irvine projects built by Opus West being in financial distress.
That hasn’t stopped industry speculation, which has intensified in the past few weeks thanks in large part to a lawsuit implicating Opus West and its parent company, Minne-tonka, Minn.-based Opus Corp.
On April 15, a group of lenders filed a lawsuit against Opus West in an Arizona superior court, claiming $160 million was owed for unpaid construction loans, interest and legal fees.
The lenders, led by Bank of America Corp., said that the developer is behind on payments for 10 separate loans, according to a report in the Arizona Republic. The story didn’t specify which projects the loans were tied to.
At least one Opus West property is apparently going back to the bank. In Austin, Texas, Hill Country Galleria, a $192 million outdoor mall that Opus West built two years ago, has been posted for foreclosure, according to local reports.
Seventy percent of the 1.3 million-square-foot project is leased and the mall is cash-flow positive. But the developer couldn’t sell or refinance its short-term construction loan that matured early this year, company spokeswoman Winston Hewett said.
Opus West typically builds and then sells projects,it isn’t in the business of running them.
The Austin property is slated for a foreclosure auction on Tuesday, but the developer and its lenders were still working to avoid that scenario, Hewett said.
Opus West is one of five regional divisions operated by Opus Corp., which counted more than $2 billion in revenue last year.
Other regional divisions are having their own issues.
Atlanta-based Opus South filed for Chapter 11 bankruptcy protection on April 22 in U.S. Bankruptcy Court in Delaware.
The Opus South portfolio, which includes a large number of Florida condos, was hit hard by the sharp downturn in that portion of the South’s real estate market, Hewett said.
That division has 12 bank loans worth a total of $324 million that are either maturing or can be called in this year, according to reports.
Company officials were unable to provide specifics as to when loans tied to Opus West’s OC projects were set to mature, saying that their focus now is on Opus South and the Austin property.
Opus Corp.’s conditions vary considerably by region, according to Mark Rauenhorst, the company’s chairman and chief executive. Rauenhorst said in a statement that the challenges in the industry are as difficult as the company has ever seen in its 56 years in the business.
If another operating division of Opus Corp. has to file for bankruptcy, other local real estate developers say it’s likely to be Opus West. That’s due to the company’s large number of projects built in once-hot markets in California, Texas and Arizona, which now are feeling the brunt of the recession, according to sources.
On a corporate level, Opus Corp. has been resizing itself to account for the current economy. In January, the company reportedly laid off about 200 people, or 10% of its national workforce. Layoffs largely came in its architectural and engineering departments.
