Curt Olson received some good news last week.
The local developer, who last year announced plans to build $76 million of new high-rise office towers in Santa Ana, finally inked the last set of documents on a $62 million construction loan from Bank of America.
“We’ve had a commitment for some time, but we needed to finish up all of the paperwork,” said Olson. “But since we knew the financing was being made available, we were able to begin the process of ordering the steel.”
So crews have started clearing 5.9 acres next to the new headquarters of First American Financial Services off the Costa Mesa (55) Freeway and MacArthur Boulevard. The new pair of nine-story buildings, to be called the Twin Towers of MacArthur Place, will go next to the 11-story 3 Imperial Promenade.
B.R.E. Investment Trust also is developing luxury condominiums at MacArthur Place along with space for retail outlets and restaurants.
And Mola Development, which owns an adjoining 3 acres, is moving forward on several fronts to bring more businesses to the 65-acre MacArthur Place development. It is negotiating with a hotel, a megaplex theater developer and several retail chains.
“A lot is going on in the South Coast Metro area,” said Jeff Bitetti, director of marketing for Olson’s Nexus Development Corp. “We certainly couldn’t be more pleased with the timing for getting under way with development of our twin towers.”
More Going Up
However, the Nexus project is not the only office development in the area that is poised to begin.
The new MacArthur Place buildings will go up as Koll Development is finalizing plans to develop a twin to its recently completed eight-story office building in the nearby Irvine Concourse.
Koll is finalizing an equity deal with the National Electrical Benefit Fund, a Washington, D.C.-based union pension fund, to finance the new building.
“Our plans are moving forward,” said Jerry Yahr, Koll Development’s executive vice president. “We’re probably physically two to three months from breaking ground. But we’ll be ordering steel momentarily.”
Koll is expecting to complete a second office building totaling 178,000 square feet at 1901 Main St. sometime during the summer of 2001.
Opus West is also looking at developing a new 12-story tower in the Concourse, which is along MacArthur Boulevard and Main Street in Irvine.
“We’ve designed about 50% to 60% of it at this point,” said Paul Marshall, senior vice president of Opus West in Irvine. “Our goal is to make a decision in the next month or two on whether to go ahead with that project.”
The building would be identical to the new Opus Irvine building, which recently opened and is about 60% leased.
“We’ll be offering over 400,000 square feet to the market,” said Olson, “so we think it would be prudent of other developers and investors to wait and see how existing space goes.”
Steel is set to be delivered to Nexus Development by June 5, he added.
Taking the Lead
“That means we’ll be coming out of the ground first,” said Olson when informed that Opus West and Koll have yet to make similar orders.
Taking a lead in the race to cash in with new office space in a red hot Orange County office market is a dramatic change of events for Nexus. After announcing their plans early last year, Olson and his staff have watched Opus West and Koll develop buildings in the same submarket, near John Wayne Airport.
But the tide seems to be turning Olson’s way, at least for the time being.
In September, he signed Los Angeles-based MSC.Software to take almost 130,000 square feet in the first building to be completed. The 12 1/2-year deal, according to sources, is valued at around $29 million. With that deal in hand, Nexus was able to land a major lender to help bankroll the development.
Olson says he will pitch in close to $14 million to complete the project, which is targeting a February 2001 opening. The second tower should be ready about a month later, according to Bitetti.
If they can meet that timetable, Nexus will be offering the first new large office space to hit the airport market in more than 18 months , the last ones being the initial Irvine Concourse buildings by Koll and Opus.
“There are some smaller buildings going up on the other side of the (Corona del Mar) 73 freeway in the Newport Beach area,” said Jay Carnahan, a principal of CMG Real Estate. “But Curt’s project will be the only new high-rises to come online within that timeframe.”
The veteran Newport Beach-based entrepreneur pointed out that several large blocks of space will be coming to market during the next 18 months, though.
Chief among those will be some 257,000 square feet of space being vacated by AirTouch Cellular in the Irvine Co.’s Jamboree Center. The company is building a new regional campus on 29.6 acres in the Irvine Spectrum.
“The AirTouch block is expected to become available by the end of 2000,” said Carnahan. “That space alone will be the size of a whole building. And it will be coming to market in one of the most expensive sections in the airport area.”
Strong Demand
Demand remains strong in the market, say other brokers. Carnahan agrees and predicts that landlords will spike rental rates throughout the coming year.
Asking rates at Koll’s new building in the Irvine Concourse are around $2.50 to $2.65 per square foot per month. At the adjacent Opus West tower, space is being marketed in the $2.55-to-$2.75-a-square-foot range on a full-service basis.
At Olson’s Twin Towers at MacArthur Place, rates are expected to start around $2.25 a square foot.
“What he’s asking is very affordable considering what else is happening in this market,” said Carnahan. “Other large blocks of space will be available when his towers are ready to hit the market, but you won’t see any other cranes in the air of this scale. So Curt’s timing couldn’t be better.” n
