Regulatory documents are shedding a bit more light on FivePoint Communities Inc.’s blockbuster purchase of Broadcom Ltd.’s four-building, 73-acre campus under construction at Great Park Neighborhoods in Irvine this month.
The $443 million deal, which concluded on Aug. 10, is Orange County’s largest office sale in years and concludes one of the longest running commercial real estate sagas here.
The Business Journal first reported that Broadcom had put the 1-million-square-foot campus, plus excess land that can hold additional development, on the market for sale in April 2015.
Earlier this year, the consensus among area market watchers was that the campus would be bought by a venture between the local office of Houston’s Hines Interests LP and Newport Beach-based Pacific Investment Management Co.
The predictions went sideways in May when Aliso Viejo-based FivePoint said it was considering exercising a buy-back option for the site, which it sold to Broadcom in 2015.
Ultimately, “FivePoint decided that they wanted to move into the commercial space,” said Anthony DeLorenzo, senior vice president with the Investment Properties-SoCal team of CBRE Group Inc.
DeLorenzo marketed the space for Broadcom along with colleagues Kevin Bender, Todd Tydlaska and Jake Stickel. He confirmed last week that Hines and Pimco—which also own the Intersect office campus near John Wayne Airport—had struck a deal to buy the Broadcom space prior to FivePoint exercising its buy-back option for the property.
FivePoint completed the deal this month, forming a new venture called Five Point Office Venture Holdings I LLC with two existing partners in its Great Park Neighborhoods venture.
It renamed the campus Five Point Gateway.
“This venture adds a new dimension to our company as we start building our commercial portfolio,” FivePoint Chief Executive Emile Haddad said in a statement.
The master developer in a news release announcing the purchase didn’t disclose its partners in the venture, but regulatory filings show affiliates of Boston-based Rockpoint Group LLC and Starwood Capital Group of Greenwich, Conn., as the two additional investors in the campus.
FivePoint contributed $106.5 million toward the venture, giving it a 75% ownership interest “with responsibility to manage and administer its day-to-day business and affairs and implement the approved business plan,” filings show.
Rockpoint contributed $26.6 million toward the venture for a 19% stake. Starwood, which became an owner in Great Park Neighborhoods through its 2013 buy of LNR Property, contributed an additional $8.9 million for a 6% stake.
Another Starwood affiliate, Starwood Property Trust, is acting as a lender in the office buy. It provided $339 million in loans to cover the remainder of the purchase price, plus some funds for tenant improvements at the campus, where two of the four buildings are complete.
The loans include a $271.4 million primary mortgage and a $67.8 million mezzanine loan, regulatory filings show.
“Starwood was able to differentiate themselves during the marketing process due to their ability to provide the most efficient pricing at optimal leverage with extremely flexible terms under a compressed time frame,” said HFF LP Senior Managing Director Kevin MacKenzie, who helped arrange the loan along with colleagues Lee Redmond and associate Peter Thompson.
HFF said the two financing deals were five-year, floating-rate loans.
Broadcom is leasing back the two largest buildings at the new campus under a 20-year lease, the 373,167-square-foot 15191 Alton Parkway office and the 287,726-square-foot 15101 Alton Parkway.
Homebuilder Lennar Corp., FivePoint’s largest investor, will lease an additional 90,000 square feet at one of the smaller buildings, and FivePoint is occupying an additional 44,400 square feet, regulatory filings show.
The property is now 77% preleased. FivePoint estimates that the annual stabilized net operating income for the campus will be about $27 million.
That translates to monthly rents of roughly $2.25 per square foot.
At that estimated monthly rent, Broadcom will be paying nearly $18 million annually to rent back the two offices, and the total cost of the lease-back portion of its deal with FivePoint will be nearly $350 million—which at a total dollar cost is among the biggest lease deals ever struck in OC.
