There are rumblings of building sales again in Orange County’s office market.
After seeing only a smattering of big-dollar office sales so far this year, OC saw its two biggest sales of 2009 close within a day of each other last week.
On June 1, Transpacific Development Co. said it bought the 270,000-square-foot Irvine Spec-trum office complex that’s served as the West Coast headquarters for Ford Motor Co. since 2001.
The Torrance-based company paid about $73 million, or $270 per square foot, for the two-building complex, which is set to become the headquarters for Irvine-based Taco Bell Corp. next year.
On June 2, real estate investor Abbey Co. of Long Beach closed on a deal to buy the 457,000-square-foot City Parkway office tower complex in Orange from Maguire Properties Inc.
Terms of the City Parkway deal weren’t disclosed. The building appears to have traded hands for $50 million to $60 million, or roughly $130 per square foot, based on the debt Los Angeles-based Maguire was carrying on the property.
Prior to these deals, the biggest office sale in the county for 2009 had been for $30.5 million, when Los Angeles-based biotechnology company Abraxis BioScience Inc. bought the former Costa Mesa headquarters of Valeant Pharmaceuticals International in April.
2008 Slowdown
In 2008, there were five office sales here that each were valued at more than $50 million as financing for big deals became harder to find.
The big transactions are good signs for the slumping local market. But the deals aren’t necessarily a precursor of more to come, according to industry watchers.
“I don’t think we’re back yet,” said Kurt Strasmann, managing director of OC brokerage operations for Santa Ana-based Grubb & Ellis Co.
“A lot of people are focused on (managing) their own portfolios, working down debt and renegotiating (loan) terms. They’re not looking to buy,” Strasmann said.
That hasn’t stopped speculation from ramping up about what sales,of both relatively stable properties and distressed assets,might be on the horizon.
The former Newport Beach headquarters of bankrupt Downey Financial Corp. appears to be one property going back up for sale.
The Federal Deposit Insurance Corp. is preparing a sale of the 320,000-square-foot, two-building property that long had served as Downey’s headquarters. The Irvine office of Cushman & Wakefield Inc. is helping with the listing, according to sources.
An asking price for the buildings hasn’t been disclosed. Downey had been looking to fetch about $115 million for the property late last year, prior to its bankruptcy. Getting that price now could prove to be a stretch.
Downey’s remaining operations, now under the care of U.S. Bancorp, are being relocated to the Park Place campus in Irvine in August.
Also being marketed for sale is 3 Imperial Promenade, a 246,763-square-foot office building just off MacArthur Boulevard in Santa Ana, near the campus of First American Corp. Eastdil Secured LLC is handling the listing.
A division of New York-based Tishman Speyer Properties LP, the office tower’s owner, just put the building and three other others in California for sale, according to a report this week by CoStar Group Inc.
Tishman paid $83 million for MacArthur Place near the peak of the market, in mid-2007. There’s no report of the building being under any financial distress.
If those two sales follow the lead of last week’s deals, then pricing will be down sharply from what their owners would like to see.
At the peak of the market, comparable Irvine Spectrum-area properties to the one Transpacific bought from Ford sold for close to $350 per square foot, rather than the $270 per square foot seen last week.
Abbey appears to have cut a good deal with Maguire and its lenders. Two years ago, Central County offices similar to City Parkway sold for about $100 per square foot more than the estimated $130 per square foot price Abbey paid.
Unlike Transpacific, which is buying the buildings at One and Three Premier Place fully leased, Abbey has work to do.
The buildings previously were leased to the parent of subprime lender Ameriquest Mortgage Co. They were only 30% full at the end of the first quarter.
Cash Is King
With financing still a big issue, deals being completed these days need to have buyers flush with cash, of which there aren’t too many of, Strasmann.
Count Abbey and Transpacific among that small group,each deal was done on an all-cash basis.
Motivated sellers, and often agreeable lenders, also are needed to get deals to close.
In the Transpacific deal, embattled automaker Ford clearly had a need to raise cash.
The company, which still will occupy about a third of the property, built the offices in part to house the U.S. headquarters for Ford’s Premier Automotive Group, which was made up of the automaker’s European brands. Ford since has sold off most of those brands.
Maguire said the City Parkway sale was done in an arrangement with the property’s lender. The under-fire office landlord, which bought the property near the peak of the market in 2007, had about $99 million of debt tied to the property.
Maguire said it was taking a $40 million hit on the sale.
