Newport Beach-based Koll Development Co. has sold its 178,000-square-foot office building in The Irvine Concourse business complex to Australia’s Terrace Towers for roughly $48 million.
Coupled with Opus West’s plans to market its 260,000-square-foot building in the same center, the move means the two newest high rises in Orange County shortly will have changed hands.
Barry Chase, president of Koll Development’s Western division, said the sale of Koll Center Irvine North Phase I is nothing extraordinary for his company and its financial partner, New York-based NorthStar Capital Investment Corp.
“Our strategy the last three years has been to be a merchant builder,” he said. “So we’re just sticking to our business plan, which is to build buildings, get them (financially) stabilized and sell them into the market.”
Koll Development,which is equally owned by Koll Co. Chairman Don Koll and NorthStar Capital,closely followed Phoenix-based Opus West last year in launching the first high-rise construction in OC in about 10 years. Opus West, which operates under a similar philosophy to Koll Development, recently began marketing its 12-story Opus Center Irvine tower at 2020 Main St.
While the move by Koll Development was not unexpected, the sale of the eight-story 1900 Main Street building has fed industry speculation about a split between Koll Development and NorthStar Capital, which both firms deny. Observers believe NorthStar may withdraw funding from Koll Development because it is unhappy with the return on its investments with the Newport Beach-based company. Koll Development’s recent decision to sell its stake in the former Koll Center South office project in Irvine, which is planned for 250,000 square feet of space, was believed to have been another example of this.
Both Koll Development and NorthStar Capital officials denied there’s any tension in the relationship.
“(The sale) really has very little to do with NorthStar,” Chase said. “It has a lot to do with our business strategy. NorthStar has the right to be an equity investor in any project they want to be an equity investor in.”
NorthStar Capital partner Peter Ahl concurred with Chase, and said the investment fund will continue to look at opportunities with Koll Development.
“We’re just selling in the normal course (of business) and realizing profits as properties are developed and leased up,” Ahl said. “It’s been a great market for us and the deals we’ve done with Koll have been very succcesful.”
Nonetheless, NorthStar Capital isn’t funding Koll Development’s second building at the corner of MacArthur Boulevard and Main Street. Chase said an unnamed pension fund is providing the equity for Koll Center Irvine North Phase II, a twin of the building that was just sold. That building broke ground in July with an anticipated completion date of September 2001.
The building recently sold was completed last year and is 96% leased. The agreement to sell came relatively quickly, since Terrace Towers officials approached Koll Development even before the building was listed.
“This buyer has been looking at projects in this market for some time, and it never really found an asset at a price they were prepared to close (escrow) on,” Chase said. “They liked the building, the location and the tenants.” n
