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Wednesday, Jun 19, 2024

Lincoln Property Buys in Laguna Hills, More to Come?

Lincoln Property Co. is a big developer and property manager across the country. But the Dallas-based company largely has stayed away from California, particularly Orange County.

The handful of offices it owns in the state are in Riverside and San Jose. Lincoln also has apartments in San Diego.

A $36 million buy in Laguna Hills could be the start of more local investments for Lincoln.

The company closed on the sale of Oakbrook Plaza, a four-story, 120,000-square-foot office building just off the San Diego (I-5) Freeway, late last month.

Irvine-based LBA Realty sold the 21-year-old building. LBA had owned the property for about two and half years. Robert Griffith and Jon Nesbitt of Grubb & Ellis Co.’s Newport Beach office represented the buyer and seller in the deal.

Monthly rents at Oakbrook Plaza run about $2.45 per square foot.

Lincoln quickly closed on the buy. The building, on Avenida de la Carlota, had been marketed since September. The sale took less than a month to close after Lincoln put a bid on it, Griffith said.

The fast closing appealed to the seller. It also could signal Lincoln’s intention to grab more business in the region. The company reportedly plans to open an office in Los Angeles.

Landlord GE

The real estate arm of GE Commercial Finance is set to become a notable local landlord, thanks to its buy of Los Angeles-based Arden Realty Inc.’s roughly 3.4 million-square-foot, 19-property OC portfolio. The deal also includes about 100 other California properties.

The General Electric Co. unit paid roughly $4.8 billion in cash and debt in all for the Arden buildings it bought.

Local buildings include the 10-story, 175,000-square-foot Anaheim City Center, the 12-building, 597,000-square-foot Centerpointe La Palma complex and the 305,439-square-foot Orange Financial Center.

Chicago-based Trizec Properties Inc. also got in on the Arden buy, but not OC. Trizec is paying Arden $1.6 billion for 13 Southern California properties, totaling 4.1 million square feet. They are in West Los Angeles and San Diego.

Trizec now has a Southern California office portfolio of about 8.6 million square feet, making it the company’s largest market. But OC still is off-limits for the real estate investment trust.

Some industry watchers speculate the reason is Trizec’s preference for prestigious, trophy office buildings in big cities.

Last month, I wrote about a report on the local apartment market from Palos Verdes-based nonprofit Center of Real Estate Studies. The center predicted a 0.2% decrease in local rents during the next two years, making OC one of the four worst markets in the country for apartment investors.

Another study has come to the opposite conclusion.

Marcus & Millichap Real Estate Investment Brokerage Co. believes OC stands to be the top spot in the country for apartment investors. The Encino-based brokerage’s national apartment report, due out later this month, projects OC rents will rise 5.6% this year, putting the average rent at $1,446.

The low vacancy rates in the county,which could drop to 3.2% this year,are a major factor behind the area’s strength, said John Sterns, spokesman for Marcus & Millichap.

With the dueling studies, I decided to get an apartment owner’s take on the issue. Steve Donohue, president of Western National Property Management, part of Irvine-based Western National Group, splits it down the middle.

“By no means will this be the worst market in the country, nor will it be the best,” he said. “It’s likely to be somewhere in be-tween.”

Western National owns about 13,000 apartments and manages another 12,000, including in OC.

But Donohue said he clearly expects to see rents go up this year, in the 3% to 5% range, with certain areas stronger than others.

The southern part of the county has more apartments being built, particularly in Irvine. That could raise the potential for concessions and temper rent increases.

Central and northern parts of the county could be tighter, without a lot of new apartments on the horizon.

“We’re bullish on 2006,” Donohue said. “Supply is still moderate.”

The number of apartment units being converted into condos could add to the tightening market, he said.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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