The four-building Von Karman Towers office complex near John Wayne Airport has a unified ownership structure for the first time, after the newest and most prominent building at the campus, the 2211 Michelson tower, traded hands for close to $116 million.
A new holding company backed in part by Irvine’s Greenlaw Partners last month closed on the purchase of the 12-story tower, which opened in 2007 and was the first sizeable office building built in the airport area during the last real estate cycle.
2211 Michelson was sold by Los Angeles-based Kilroy Realty Corp., which paid a reported $103.2 million for the 271,556-square-foot office in 2010, or $380 per square foot.
The latest deal works out to a price of about $425 per square foot for one of the more higher-end buildings near the airport.
It’s among the largest office sales in OC this year by total price, and on a per-square-foot basis it is among the five top deals for a larger-sized office in the airport area the past 10 years, brokerage data indicates.
WeWork Hit?
It can be argued the new owners still got a good deal; other buildings in the same complex traded for close to $500 per square foot during the last real estate cycle, before plummeting in value during the Great Recession.
When the 2211 Michelson building was put on the market by Eastdil Secured LLC in May, an asking price close to $125 million was reported, which would have been 21% higher than what Kilroy paid for it.
The more modest 12% uptick in value seen from sale appears to be related in part to the building’s tenant mix; while brokerage data shows the building to be about 94% full, nearly 70,000 square feet of that space was leased earlier this year to coworking firm WeWork.
The under-fire coworking firm is expected to open the three-floor location in the next few months. It is one of three airport-area spots it has leases for in Irvine; it’s also planning to occupy much of a four-story building at the next-door Lakeshore office complex.
Other large tenants at 2211 Michelson include Edwards Lifesciences Corp. and Burnham Benefits Insurance Services Inc., according to data from real estate market tracker CoStar Group Inc.
Development Potential
Von Karman Towers’ collection of four buildings totals about 845,000 square feet, according to CoStar data.
Greenlaw Partners, one of the area’s largest privately held real estate investors and developers, has a stake in each of the buildings now, following the latest deal.
It bought other offices there for as little as $180 per square foot following the last downturn.
Sources familiar with the deal tell the Business Journal the firm—which has its headquarters in the complex—is now likely to consider additional development on the roughly 6-acre campus on some of the excess land at the prominent site.
The campus is at the intersection of Michelson Drive and Von Karman Avenue.
Tenant amenities, dining options and other work are possible, although no definitive plans have been proposed yet.
Greenlaw’s deal for the building was made under the 2211 Michelson Holdings LLC name, property records indicate.
Monster Partners
Sources tell the Business Journal that Greenlaw’s financial partners in the latest deal were Rodney Sacks and Hilton Schlosberg, the top two execs and individual shareholders at Corona’s Monster Beverage Corp. (Nasdaq: MNST).
The duo have made a string of office purchases in the area, primarily under the Hilrod Holdings name, for personal investments outside of their work with the $30.5 billion-valued energy drink maker.
Hilrod has now invested with Greenlaw for a trio of offices at Von Karman Towers; the fourth building at the complex is owned by a venture between Greenlaw and New York Life Insurance Co.
The 2211 Michelson purchase is the second big office deal in the airport area for the Greenlaw-Hilrod partnership this fall. A few weeks ago they closed on Irvine’s 2040 Main building, a 14-story tower in the Irvine Concourse office campus, about a half-mile away, on the opposite side of the San Diego (405) Freeway.
That 17-year-old building, home to law firm Knobbe Martens and others, traded hands for about $130.4 million, or $400 per square foot.
Kilroy Was Here
The sale marks the end of Kilroy’s presence in Orange County. It shed a sizeable industrial portfolio in the area seven years ago, and has been selling off its collection of offices here over the same time as well.
It owned close to 4.4 million square feet of office and industrial buildings in OC as of seven years ago.
Officials with the $9 billion-valued real estate company, whose portfolio is largely in the West Coast, previously said that Orange County’s office market wasn’t a priority for it, due to Irvine Co.’s dominant position here.
“You have to be careful that you have exactly the right product, and you have to be a [market] timer because of that big beast called the Irvine Company,” Kilroy officials said in 2013.
