COMMERCIAL
Grubb & Ellis Co.’s first-quarter office market report is in line with what I have been hearing: It’s becoming a landlord’s market, at least for class A stuff.
The bottom line is rents are on the rise.
“Major Orange County landlords including The Irvine Company and Maguire Properties are looking to increase rents by about 15% in 2005,” the report states. “Companies are experiencing sticker shock at the going rate for the space they leased only a few years ago.”
OC’s finer office buildings are doing a lot better than older class B space, according to Grubb. The average class A rent was $2.41 per square foot per month at the end of the quarter. The average class B rent was $1.85.
The gap partly is due to tenants who left older buildings for nicer, newer stuff amid cheaper class A rents of recent years.
Falling vacancies are the main reason landlords are doing better.
The office market’s overall vacancy rate dropped to 9.9% in the first quarter, according to Grubb. That’s down from 10.7% at the end of last year and 13.6% in the first quarter of 2004.
Another positive sign: absorption totaled 619,719 square feet in the first quarter,that means much more space was occupied via leases and sales than vacated. Most of that taking was in class A buildings, which recorded absorption of 535,457 square feet.
Grubb cites a bustling local economy as the catalyst. It notes the first quarter finished with an unemployment rate of 3.8% compared to 5.4% for California and 5.2% nationally.
RESIDENTIAL
His plans are revealed!
Back in January, I wrote here that William Lyon and a trust fund for his son bought about 1 million shares of Newport Beach-based William Lyon Homes Inc.
Since the general already controlled the company,he’s the dominant owner, chief executive and chairman,I didn’t do a big story on his grabbing another million shares.
In a statement back then, Lyon said he bought the shares as an investment and “to provide him with greater voting control with respect to the election of the members of the board of directors.”
Now it appears Lyon had more in mind.
Late last month he made his intention clear: to take the company private. He offered $82 for each share he doesn’t already own.
Lyon’s plan has been met with some resistance, and perhaps a bit of opportunism from lawyers. Within days of the buyout offer, several law firms filed separate class action suits against him, saying his offering price is too low.
Meanwhile, the stock has been trading up, a sign investors expect Lyon to raise his offering price.
In less dramatic news, William Lyon Homes is finding the red tape thick in its effort to build homes on the former Tustin Marine base with partner Miami-based Lennar Corp.
The reason: The builders bought land that falls under the purview of two cities, Tustin and Irvine.
The builders are using Santa Ana-based J.L. Hare Associates to gain city approvals.
The homebuilders plan Columbus Grove, which should total 410 homes. Some homes have to be approved by Tustin and some by Irvine.
There are several tricky points, according to J.L Hare.
For one, the landscape architect’s plans need to meet the requirements of both city parks departments. And getting permits may take longer at one city.
J.L. Hare has worked as liaison for several developers at Talega in San Clemente. The company had to get approvals from the county and a joint powers authority set up to represent San Clemente, which was annexing the land.
Office Building to Boot
Whatever it takes.
Los Angeles-based West Millennium Homes paid about $15 million for an office building in Irvine,just to get its hands on the dirt underneath it.
West Millennium plans to leave the building intact but construct a parking structure on the property to be used by residents of its proposed condominium project next door, according to Rob Mitchell of Voit Commercial Brokerage LP.
Mitchell and Voit colleagues Alan Pekarcik and Dan Vittone brokered the deal with seller Newport Beach-based Newport Federal. The building totals 67,000 square feet and is located on 3.7 acres at 18831 Von Karman.
West Millennium plans 116 condos at the southwest corner of Von Karman and Dupont Drive.
Closing Loans
I have long heard that profit margins are thin in the home loan business.
But I never heard it put as emphatically as by Stephen Gordon, chief executive of Irvine-based Commercial Capital Ban-corp.
In a release, he said single family lending is “a lower yielding, margin depressing, overly competitive and commoditized, lower return on equity way of doing business.”
Commercial Capital plans to stop making home loans.y
