The recently redeveloped Red Hill Avenue building that holds the headquarters of dental-practice manager Pacific Dental Services Inc. in Irvine has been sold to a Silicon Valley-based real estate investor.
Palo Alto-based Menlo Equities LLC, an active investor in Orange County’s commercial real estate market over the past four years, last month closed on the purchase of 17000 Red Hill Ave., a 118,006-square-foot office near John Wayne Airport.
Financial terms of the deal were not immediately disclosed; sources put an estimated purchase price for the building in the neighborhood of $30 million, or roughly $250 per square foot.
Menlo Equities took out a $15.5 million loan with JPMorgan Chase Bank to fund the purchase, according to property records.
The deal marks another notable sale of a newly designed creative office space in Orange County.
An LLC with ties to the ownership group of Pacific Dental paid a reported $13.6 million for the Red Hill building in 2012. It was one of the pricier OC industrial sales that year.
The 40-year-old warehouse, at the intersection of Alton Parkway and Red Hill, was previously used by an electronics and communication unit of defense and aerospace manufacturer Rockwell Collins.
Renovation
Pacific Dental is said to have spent nearly another $11 million to renovate the building following its 2012 purchase.
It demolished a large portion of the original industrial building and added a variety of creative-office features, including a covered atrium with meeting space and an employee break area to the 8-acre site.
The sale “demonstrates the strong demand from institutional investors for creative-office space,” said Scott Read, executive managing director for the Newport Beach office of Newmark Grubb Knight Frank.
Read and colleague Michael Kane brokered the deal for the seller.
Pacific Dental occupies 85% of the property, which is fully leased.
The company builds and manages offices for dentists, offering services that take care of just about everything except the actual dentistry.
It handles areas such as human resources, managed care contracting, billing and collections and buying supplies.
The privately held company, which started in Costa Mesa in 1994, had $685.5 million in revenue for the 12-month period ending in June.
The company has a lease at the property that runs more than 10 years, according to marketing materials for the office.
The purchase of a fully leased office in OC stands in contrast to the most prominent local offices owned by Menlo Equities, which is estimated to own about 1.1 million square feet of commercial real estate in the county.
A large portion of the investor’s local portfolio is in the vicinity of the Pacific Dental property, including the 420,000-square-foot Quintana office campus in Irvine.
It bought the four-building Quintana property—the former Washington Mutual Inc. campus at the intersection of Main Street and Von Karman Avenue—in 2010 for an estimated $69 million.
Largely Empty
The midrise office campus, which was bought out of receivership, has remained largely empty since the sale.
Menlo Equities has been holding out for a large tenant to take up the bulk of that space, but to date no prominent leases have been announced by the landlord. Real estate sources have suggested that some of the area’s more prominent healthcare and automotive companies are potential tenants for Quintana.
Officials at Menlo Equities declined to comment for this story.
Other notable investments by Menlo in the past few years include a large warehouse and data center property next to Quintana, as well as a pair of offices at the Summit office campus in Aliso Viejo.
The investor is estimated to have spent more than $200 million on Orange County office and industrial property purchases over the past four years.
Only one local sale by Menlo has been announced over that time.
The company in July sold 2525 Main St., a two-building property a few blocks from Quintana.
An affiliate of Portland, Ore.-based private investor J&R Group LLC paid about $36 million for the Main Street property, which totals about 143,700 square feet and includes a one-story data center that’s connected to an office building.
Menlo paid about $20 million in 2010 for the property, which was previously known as Cartwright Corporate Center.
