The new owners of the Main Plaza office buildings in Irvine are planning an extensive overhaul of their latest Orange County investment, even after spending nearly $200 million to buy the airport-area towers.
New York-based real estate investor Emmes Group of Cos. recently completed the buy of the two 12-story buildings at 1920 and 2010 Main St., along with two smaller next-door retail buildings that hold McCormick & Schmick’s and El Torito Grill restaurants, and a six-level parking structure.
It’s Orange County’s largest office transaction so far this year.
The properties were bought by affiliates of Emmes for $200 million, or roughly $325 per square foot for the office and retail portion of the transaction, according to property records.
Emmes took out a $162.1 million loan from a financing unit of New York private equity firm KKR & Co. to fund the deal, records show.
The sale had been expected since mid-February, when the Business Journal reported Emmes was in line to buy the offices, which were sold by San Francisco-based Shorenstein Properties LLC in a deal brokered by the local office of Eastdil Secured.
Shorenstein paid a reported $211 million in 2008 for the two buildings, which total about 600,000 square feet. They were the only OC assets in its portfolio.
The mahogany-colored offices are part of the 48-acre Irvine Concourse development, a 10-building campus that also has a pair of hotels and an Equinox Sports Club. Large tenants at the two buildings Emmes bought include healthcare real estate investor HCP Inc., which has its headquarters there, advertising firm Wunderman L.A. and lender Greenlight Financial.
The Main Plaza buildings are about 75% leased, according to CoStar Group Inc. records. That’s well below a roughly 10% vacancy rate at Class A buildings in the area around John Wayne Airport and lags that at most other offices at Irvine Concourse that are owned by a variety of investors and corporate users.
Renovation work is planned for the two buildings to bring up occupancy rates. Emmes said upgrades will include “modernizing building systems, renovating common areas and adding additional on-site amenities.”
It hadn’t disclosed how much more money it plans to put into the property.
Other area investors that looked to buy the Main Plaza offices tell the Business Journal that they underwrote the deal under the expectation that they’d have to put in about $25 million to renovate and lease them out.
The first change to the property is an easier one: It’s now known as Centerview, according to Emmes. The name change reflects that the two buildings “are located at the heart of the concourse with spectacular views of the plaza,” it said in a statement.
“We will be making significant improvements to the property that we believe will elevate the experience, not only at Centerview, but the Irvine Concourse as a whole,” said Emmes Senior Vice President Mike McCann.
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Centerview is the only Orange County asset in Emmes’ portfolio, although the investor has had plenty of financial success with its two other airport-area office properties, which it bought during the last downturn and later sold.
It bought Irvine’s 3161 Michelson tower in the Park Place campus in 2009 for about $153.4 million and sold the 20-story tower three years later to Manulife Financial Corp. for a reported $277 million in one of the area’s largest-ever office deals.
Occupancy rates at the tower rose from 44% to 94% over the time of its ownership, Emmes said.
It paid a reported $94 million for the two-building 4000 MacArthur office complex in 2011, and four years later sold the Newport Beach property for about $120 million.
Occupancy rates at 4000 MacArthur rose from 29% to 91% during its ownership, according to Emmes.
The current owners of the 4000 MacArthur campus, a venture between Houston’s Hines Interests LP and L.A.-based Oaktree Capital Management, recently listed the property for sale with an asking price expected to be around $200 million.
Emmes has kept an office in Irvine since selling its local assets. Its West Coast portfolio now includes four office properties in downtown San Diego, in addition to Irvine’s Centerview.
Emmes “is thrilled to return to the Orange County market,” McCann said.
