There still are some big Orange County office sales taking place that aren’t being driven by lenders.
Newport Beach-based Craig Realty Group, one of the country’s larger developers of factory outlet malls, recently bought a midsize office building in its hometown near John Wayne Airport.
The company, which plans to develop an outlet center at San Clemente’s stalled Marblehead Coastal development, will be moving its headquarters to the building at 4100 MacArthur Blvd.
Terms of the deal weren’t disclosed. Sources familiar with the sale put the price at $13 million, or close to $300 per square foot for the 44,811-square-foot building.
The seller was part of Newport Beach-based hotel developer and investor Makar Properties LLC, which previously used a large part of the building for its headquarters.
The building also holds the headquarters of real estate developer Capital Pacific Holdings Inc. Capital Pacific is owned by longtime local developer Hadi Makarechian. Makar is run by Paul Makarechian, his son.
Makar Properties is staying but has scaled back into a smaller space it now will lease, according to brokers.
Unlike the bulk of transactions of late, the acquisition of the upscale building wasn’t a distressed sale, said Steven Craig, chief executive of Craig Realty.
The price “wasn’t at the extremes of a couple years ago, but it wasn’t a fire sale either,” Craig said.
On a per square foot basis, the 4100 MacArthur sale appears to be one of the priciest for a midsize OC office in more than a year.
Among comparable deals, Irvine’s Allergan Inc. paid about $256 per square foot for an 86,000-square-foot office next to its headquarters in March.
The drug maker had been leasing space at the building, which was owned by Los Angeles-based Maguire Properties Inc.
Among larger offices, the most expensive sale of 2009 was for another Maguire office, the former 3161 Michelson tower in Irvine’s Park Place campus.
The new building, which now goes by The Michelson, also sold for nearly $300 per square foot, though the $160 million price was 40% lower than what it cost to build.
Building Full
4100 MacArthur will be fully occupied with Craig Realty’s impending move. The company plans to take a little less than half of the office.
“We were able to buy a building that’s fully leased, which is rare for this area, and we were able to get a good airport location,” Craig said. “It’s no secret that other (distressed) properties are going to be auctioned, but that’s not what we wanted. We didn’t want to own a larger building that’s empty.”
Brokers involved in the acquisition called the deal a positive sign but not necessarily the beginning of a turnaround.
“This wasn’t your typical transaction,” said Mike Salmon, a partner with Irvine-based Madison Street Partners.
Craig Realty had been on the lookout for a new headquarters for nearly three years, according to Salmon, who along with Madison Street’s Dave Kinney represented both parties.
When they toured the property after it was quietly put up for sale, it didn’t take long to complete a deal, Salmon said.
“Steve’s been in the business for a long time. He knew what he was doing,” he said.
Makar
It’s the latest sign of retrenching for Makar, which has had a difficult summer.
Makar saw its ownership in Dana Point’s St. Regis Monarch Beach Resort fall into foreclosure and turned over to lender Citigroup Inc. in July. It also saw another hotel it owns in Costa Mesa, the Wyndham Orange County Hotel, put into receivership about a month ago.
A big project the company’s planning in Huntington Beach, the 31-acre Pacific City development, has been put on hold amid the downturn.
Makar’s high-end headquarters, which also counts a few other tenants, wasn’t in financial distress.
Union Bank provided financing for the sale, according to Craig.
Craig Realty owns and manages more than 3 million square feet of existing retail development in six states. The company counts about 50 employees.
Craig said his company’s holding up well in the recession. Same-store sales are up about 2% from a year earlier, he said.
Cost-conscious shoppers have turned more to outlet centers during the downturn, while sales at more traditional malls have felt more pain, Craig said.
“We’re getting more than our share of business,” he said.
The company’s still awaiting the go-ahead to start work for a center in San Clemente, where work has stalled due to the bankruptcy of the SunCal Cos.-owned entity that is developing the project, as well as the bankruptcy of the project’s main financier, Lehman Brothers Holdings Inc.
Craig said he’s hopeful the project could start to move ahead in the first or second quarter of next year, if infrastructure work is allowed to resume.
