Finance giant Goldman Sachs is nearing a deal to buy one of Newport Beach’s more prominent office complexes, a sign of increased institutional investor interest in the area’s office market.
A real estate investment affiliate of the New York-based investment banking firm is under contract to buy the 4000 MacArthur office complex in Newport Beach, according to multiple real estate sources familiar with the deal.
Goldman Sachs is expected to pay roughly $475 per square foot for the two-tower complex, or nearly $180 million, according to those sources. The deal would be the second largest office sale in Orange County so far this year.
The sale is expected to close in about a month, according to real estate sources.
The $180 million price tag currently being quoted for the property is 50% more than the reported $120 million paid three years ago for 4000 MacArthur by its current owners, a venture between Houston-based real estate investor Hines Interests LP and Oaktree Capital Management LP in Los Angeles.
4000 MacArthur is home to two 10-story buildings near MacArthur Boulevard and Jamboree Road, and is part of the Koll Center Newport business park.
Auto finance company Hyundai Capital America is the largest tenant there, with just under half the space—177,000 square feet. Other large tenants include semiconductor maker MACOM Technology Solutions and healthcare firm Lifescript.
The complex is less than a mile from John Wayne Airport and arguably the premier office property in Newport Beach not owned by the Irvine Company, the area’s dominant building owner.
The buildings are about 90% leased, according to marketing materials from brokerage Eastdil Secured, which listed the project for sale in April.
The property has undergone nearly $40 million in upgrades over the past few years, according to Eastdil Secured’s marketing materials.
Buyer Switch
The expected deal for 4000 MacArthur is noteworthy in that it involves a large institutional buyer; a bulk of the largest transactions in the region over the past year have involved private, wealthy investors.
The five-building Google Center across the street from the Newport Beach complex, for example, was bought last fall by billionaire Jack Dangermond for about $440 per foot in a roughly $260 million deal.
The sale of the Google complex, which has an Irvine address, was the biggest office transaction in OC last year. Dangermond founded digital mapping company ESRI in Redlands in San Bernardino County.
Other wealthy office investors active in the area include the top two executives at Corona-based energy drink company Monster Beverage Corp., Rodney Sacks and Hilton Schlosberg.
Those two OC residents have been involved in local office purchases valued at nearly $360 million over the past two years, including a few airport-area transactions, according to Business Journal records.
A few other out-of-town investors have recently been dealmaking in the area.
Last week, the Business Journal reported that CBRE Global Investors, an investment affiliate of Los Angeles-based commercial brokerage CBRE Group Inc., bought Stadium Towers Plaza, a 12-story, multitenant building at 2400 E. Katella Ave.
The nearly $77 million paid is the most for an office in Central OC in over three years.
In late April, New York-based real estate investor Emmes Group of Cos.—a former owner of the 4000 MacArthur campus—bought the two 12-story Main Place offices in the Irvine Concourse, a roughly $200 million deal.
That transaction is currently tops among OC office sales for this year, but likely not for long.
Aliso Viejo-based FivePoint Communities Inc. has indicated it plans to buy the under-construction multibuilding campus of Broadcom Ltd. in Irvine, a deal valued at $443 million.
The transaction could be wrapped up in the next three months, according to FivePoint’s regulatory filings.
Hot Market
OC’s office market—the fourth largest office market on the West Coast with a total of 101.5 million square feet—has a lot going for it these days, which is likely to bring in more investments going forward, according to data from the Newport Beach office of CBRE.
The area ranked eighth among large metro areas in the U.S. for the lowest vacancy rate, and was fifth last year among the same areas in terms of rent growth, according to a new research report from CBRE.
“OC’s more affordable rents and robust demand resulted in a large amount of construction, decreasing vacancy and positive absorption,” CBRE said.
“Approximately 54% of the 2.3 million square feet of office space under construction is preleased and various business services, financial services and technology companies are driving demand for another 1 million square feet. This construction isn’t speculative, it’s necessary to keep up with demand,” the report said.
Chargers HQ
A deal for 4000 MacArthur wouldn’t be foreign territory for Goldman Sachs, which has other office investments in and around Newport Beach.
Goldman Sach’s OC portfolio includes Newport Plaza, a 107,472-square-foot building along Dove Street in Newport Beach, which it bought four years ago for a reported $38.8 million.
In Costa Mesa, it’s an investor in the former headquarters of Emulex Corp., which is now a creative-office project called the Hive. The complex, bought in 2015 in partnership with Foster City-based real estate firm SteelWave, is home to the new headquarters of the Los Angeles Chargers.
