This month’s abrupt closure of Royalty Carpet Mills Inc. should result in several large real estate transactions, and possibly commercial development, in the area around John Wayne Airport.
The longtime Irvine-based carpet manufacturer announced on June 15 that it and several affiliates had “closed and will not reopen,” ending a nearly 50-year run for the company founded in the 1960s by Mike Derderian. It moved to Irvine in 1973.
Royalty Carpet has long been among Orange County’s largest privately held companies and manufacturers, with an estimated 400 employees here as of a few months ago, based on Business Journal data.
It ranked No. 108 among OC’s top private companies with an estimated $100 million in annual sales on last week’s Business Journal listing of area firms.
Company executives cited in emails to other publications “the high cost of running a manufacturing company in the state of California” as a reason for closing.
The shuttering affects multiple locations in Orange County, as well as a site in the San Joaquin Valley city of Porterville where a plant was located.
Company founder Derderian died in 2013. It and affiliates Camelot Carpet Mills, Moda LLC and PacifiCrest Mills were afterward run by his daughter Andrea Greenleaf.
Greenleaf was one of just a handful of employees at the company’s massive headquarters and manufacturing facility on Red Hill Avenue last week. She declined to comment on the reasons behind the closure.
IBC Stronghold
Royalty Carpet had amassed a sizeable real estate portfolio in and around Irvine over the years, with holdings at one point topping 1 million square feet.
It was long one of the largest property owners in the Irvine Business Complex, the largely industrial area near the airport where extensive apartment construction and other infill development has occurred over the past decade.
At least two former company-owned properties in the complex have been sold in recent years, according to property records: an industrial site on Alton Parkway that was converted into a three-story self-storage facility in the past year, and a 79,000-square-foot industrial building on Derian Avenue, a street named for the Royalty Carpet founder.
The transactions netted the sellers about $21 million, according to CoStar Group Inc. records.
At least three large area buildings remain under ownership of the company and its affiliates, two in Irvine and another in Santa Ana, though probably not for long.
Newport Beach-based Turner Real Estate Investments is under contract to buy two of the properties, according to multiple sources familiar with the transaction.
The deal would include a nearly 372,000-square-foot industrial facility on East Dyer Road in Santa Ana, about a mile from its headquarters, and a smaller building a few blocks from its main Irvine facility, which is less than 100,000 square feet.
Royalty Carpet affiliates paid about $21 million for the Santa Ana facility in 2004 and an additional $10 million for the Irvine building, records show.
Terms of the sale haven’t been disclosed, and Turner Real Estate officials declined to comment last week on the transaction or its plans for the two buildings.
The deal would be the company’s largest OC transaction in years. It focuses on buying and developing industrial, flex, and low-rise office properties.
Royalty Carpet used the Santa Ana site, which sits on about 17.7 acres a few blocks from the Costa Mesa (55) Freeway, but it leased out the Irvine building.
The East Dyer site, built in the 1950s, seems a prime candidate for redevelopment, which would add to notable nearby projects.
A property on the opposite side of Dyer Road long used by ITT Corp. was recently demolished to make way for a nearly 500,000-square-foot industrial development.
Royalty Carpet affiliates also own the company’s headquarters facility, a 193,000-square-foot building on about 20 acres at the intersection of Red Hill Avenue and Alton. CoStar records show the property, which includes a large office area and manufacturing space, is assessed at nearly $14 million but would likely command at least twice as much in a sale, based on other recent area deals.
Industry watchers say Edwards Lifesciences Corp. is the most likely buyer, although a deal isn’t believed to have been agreed to yet. The Irvine-based medical device company, which has a market value of nearly $24 billion, has its headquarters next-door.
Edwards has approached Royalty Carpet multiple times over the years about a potential purchase of the property in order to expand its campus, according to executives at both companies. Its multibuilding campus, which it owns, totaled about 650,000 square feet as of late last year, according to city records.
It’s currently wrapping up upgrades to the property in a multiyear project intended to modernize facilities to accommodate growth. Changes include employee-friendly amenities, including a new on-site cafe and a walking track around its “Central Park” that’s utilized for walking meetings and employee breaks.
Alton Deere Sale
Edwards has bought other nearby buildings to expand local operations. The Business Journal earlier reported that the company paid about $18.5 million to buy a two-story building this month at 1921 E. Alton Parkway across the street from its main campus.
The company, which makes products to treat structural heart disease, specializing in artificial heart valves and critical care and surgical monitoring devices, hasn’t bought every building in the immediate area that’s been put up for sale, though.
Alton Deere Plaza, a six-building office complex about a block from Royalty Carpet’s headquarters, sold this month for a reported $32.8 million. The buyer of the 185,245-square-foot property on Deere Avenue was Benchmark Holdings, a Los Angeles-based investor making its first known area buy.
The complex is about 96% leased to a variety of tenants, according to CBRE Group Inc., whose Anthony DeLorenzo, Gary Stache, Sean Sullivan, Todd Tydlaska and Ted Snell represented the seller, a unit of AEW.
CBRE’s Shaun Moothart and Bruce Francis arranged the joint venture equity and senior debt financing for Benchmark Holdings.
The vacancy rate for low-rise office space in the IBC now stands at an all-time low of 8.1%, according to CBRE.
