A trio of local office properties are being shopped by Maguire Properties Inc., which is close to wrapping up nearly $1 billion in sales of Orange County buildings formerly owned by Equity Office Properties Trust.
The three buildings total about 800,000 square feet. They include one of Orange’s most prominent buildings, the 21-story City Tower, as well as 3800 Chapman, an eight-story building also in Orange.
Also confirmed: the listing of 18301 Von Karman, the 11-story building two blocks from John Wayne Airport that houses Golden State Foods Corp.’s headquarters. The building was said to be put up for sale last month.
The Von Karman office is next door to 2211 Michelson, the office tower built by Hines Interests LP and Crescent Real Estate Equities Co. Hines is said to be interested in buying 18301 Von Karman, according to real estate sources.
Officials for Los Angeles-based Maguire, which already has sold off about $655 million of local offices formerly owned by Equity Office in the second quarter, expects contracts to be in place for the three offices by the end of the third quarter, with a closing by year’s end.
With 50 to 60 potential buyers expressing interest in the company’s prior office sales, the market is as strong as it’s been, Chief Executive Robert Maguire said during his company’s quarterly earnings call with analysts last week.
If there’s been a change as of late, it’s that there are more pension funds, real estate investment trusts and local companies emerging as potential buyers, while the number of highly leveraged investors has decreased, said Paul Rutter, the company’s executive vice president and head of transactions.
Maguire is selling the offices to pay off the debt it incurred when it paid $2.9 billion for Equity Office’s Orange County and downtown Los Angeles portfolio earlier this year.
The office flipping has proved to be a moneymaker. The company put a value of about $315 per square foot to Equity Office’s OC buildings when it bought them from Blackstone Group. But sales following the deal have been closer to $445 per square foot, Maguire said.
Maguire counts a market value of about $1.2 billion,investors say the landlord’s offices in total are worth about $370 per square foot. Robert Maguire said he thinks the company should be valued closer to $500 per square foot.
While the sales market remains strong, leasing in OC is proving to be a trickier situation for the county’s second-largest landlord behind Newport Beach-based The Irvine Company.
Thank the imploding subprime mortgage industry for that.
Maguire, which counts about 39% of its portfolio in OC, took over a large amount of office space leased to Ameriquest Mortgage Co. after it bought the Equity Office portfolio. Plus, it already had a sizable amount of space leased to New Century Financial Corp. in Irvine.
Before the two mortgage companies began giving back space earlier this year, Maguire expected to have about 94% of its office portfolio leased by the end of the year. The company’s since revised that figure to about 88%.
In July, Maguire terminated leases for about 500,000 square feet of Ameriquest space, and assumed sublease space from the Orange-based lender in other buildings. It now only leases space in one building to Ameriquest at its headquarters, officials said last week.
Resolving issues with bankrupt lender New Century is proving to take a longer than expected. Last week, Maguire opened the doors to 3161 Michelson, the $244 million tower built in its Park Place campus in Irvine.
So far, the building has one tenant moved into the 530,000-square-foot office: law firm Gibson, Dunn & Crutcher LLP, which is taking 80,000 square feet. The building’s only about 20% leased up, following the loss of anchor tenant New Century, which was set to take up 190,000 square feet.
Technically, New Century hasn’t yet rejected the lease for 3161 Michelson, or for any of the 267,000 square feet of Maguire space it had signed leases for at Park Place. The company was recently given a 90-day extension by Delaware’s bankruptcy court to decide on how to deal with the leases, which runs through the end of October.
Maguire expects that the leases will be rejected on negotiated terms, although it is possible that certain leases may be assumed by New Century and then assigned for value to a new lessee, company officials said.
