The company recently partnered with Chicago-based Singerman Real Estate to buy 15 and 25 Enterprise, a pair of five-story offices built about 20 years ago at the Summit Office Campus in Aliso Viejo.
Property records indicate the group paid close to $92 million for the two buildings, which total about 295,000 square feet alongside the San Joaquin Hills (73) Toll Road.
It’s the priciest reported deal involving an Orange County office property in over half a year.
The sale is also the priciest deal that Harbor Associates has ever been involved in.
The campus has “many property characteristics that we think will be in demand as tenants continue returning to the office,” said Justin Loiacono, one of four principals at Harbor Associates. “We believe high-quality and well-located suburban office assets will outperform moving forward.”
Harbor has acquired 29 projects totaling north of 4 million square feet throughout Southern California and Colorado since its inception in 2015.
The new deal brings Harbor’s local portfolio to 1.1 million square feet across nine projects.
15% Discount
The seller is an affiliate of Dallas-based Invesco Advisers Inc.
Invesco, the institutional investor that’s part of the development team behind The Press in Costa Mesa, in 2015 paid a reported $108.1 million, or more than $360 per square foot, for the two Summit offices which once held the local operations of Lennar Corp. and FivePoint Holdings Inc., among others.
Both those real estate firms now operate out of the Five Point Gateway office complex in Irvine.
The latest sale of 15 and 25 Enterprise, at a nearly $312 per square foot price, marks a 15% discount over the prior sale.
The buildings have been valued far less; Palo Alto-based Menlo Equities LLC acquired the two offices in 2011 for a reported $57.5 million, when the buildings were lacking tenants after the last real estate downturn.
The buildings are currently about 80% leased to a mix of technology, life science and financial service firms; tenants include mortgage lender Carrington Mortgage Services, vitamin and supplement maker Metagenics and device maker MicroVention, which also occupies another building nearby at the Summit.
“The project has solid in-place tenancy and is in a great location that’s walkable to about 1 million square feet of retail as well as new residential communities,” Loiacono said.
“Coming out of the pandemic, we think suburban offices with attributes that mirror more urban campuses will be strong winners.”
Harbor is planning a renovation for the asset that will redesign the interiors and exterior courtyard, add new office suites and install new air filtration systems.
The renovation aims to “provide a collection of wellness, work, and social spaces woven throughout the site to not only encourage employee work-life balance, but to foster an environment of collaboration outdoors,” according to Harbor Principal Rich McEvoy.
New Acquisition Strategy
This is the third acquisition Harbor has made since the start of the pandemic, following others in Carlsbad and in the Inland Empire.
The company is backed financially in part by Bascom Group, an Irvine-based real estate investor best known for its large national apartment portfolio, but which also funds a number of additional investment, development and shared space businesses in the area.
Harbor initially focused on small and midsized offices locally, but has been looking bigger in recent years.
Prior to the Summit acquisition, Harbor made two of its largest deals in the region in 2019 when it bought two office properties in downtown Anaheim and in Laguna Niguel for about $80 million combined.
Harbor has refocused its acquisition strategy in the past year to include mid- or low-rise projects in walkable suburban areas, choosing to “shy away from more traditional, high-rise, commodity products,” Loiacono said.
He added that while capital markets for office transactions have been largely frozen as of late, there is financing available for more stabilized projects with strong in-place tenancy.
Harbor has a goal of investing an additional $250 million in such office projects over the next 12 months in Southern California and Colorado.
“We are looking to stay nimble as we scout opportunities in our existing markets,” said
“We’ve seen positive momentum in the past month or so as vaccines rollout and stay-at-home orders are lifted, signaling more confidence in the market for office tenants,” he said.
