Newport Beach-based KBS Realty Advisors, one of the country’s largest office owners, is poised to buy central Orange County’s biggest office tower in what would be its priciest local acquisition in over a decade.
The company’s KBS Strategic Opportunity REIT, an investment affiliate that as of September had about $1.3 billion in real estate assets to its name, said this month that it entered a deal to buy City Tower, a 21-story office in the city of Orange.
The 333 City Boulevard W. property is on five acres next to the Outlets of Orange shopping center and a few blocks from Christ Cathedral in Garden Grove.
The 428,627-square-foot tower is about 76% leased to 24 tenants, according to KBS.
The purchase price is $147.3 million, according to regulatory filings, or nearly $344 per square foot.
The deal would be the most expensive for a central OC office in over five years, and one of just two area deals during that period topping $100 million.
A time frame for completing the sale hasn’t been disclosed.
Torchlight Sale
City Tower was listed for sale late last year by the local capital markets team of Newmark Knight Frank, whose Kevin Shannon, Paul Jones, Ken White and Blake Bokosky have the listing. The office was built in 1988 and renovated in 2016.
It’s owned by New York-based Torchlight Investors, one of the country’s largest managers of distressed properties.
Torchlight had operated the tower since 2011, when it took control of a $115 million nonperforming loan tied to the office. In 2014 it grabbed outright ownership after paying a reported $95 million to buy the nonperforming note.
City Tower was one of several central OC offices previously owned by Maguire Properties Inc., which gave back several area office properties to its lenders following the recession.
The tower brings in about $10.3 million in annual rents and monthly rents of about $2.88 per square foot, according to regulatory filings pertaining to the pending sale.
Car rental firm Enterprise Holdings’ Southern California Group headquarters is the building’s largest tenant, with nearly 60,000 square feet, according to CoStar Group Inc. records.
Foreign Proceeds
KBS Realty and affiliates have more than $10 billion in assets under management. Last year it ranked No. 11 among the country’s largest office owners, with nearly 40 million square feet, according to National Real Estate Investor.
The firm buys on behalf of pension funds and other institutional investors, as well as private investors who buy shares in its numerous nontraded real estate investment trusts.
The company’s recently tapped foreign exchanges to raise more money. Its KBS Strategic Opportunity REIT, the nontraded REIT that will buy the Orange tower, raised nearly $250 million through a 2016 bond offering in Israel, and last year sold some properties for a new REIT it owns in part that’s now traded on Singapore’s stock exchange.
KBS said it intends to fund the City Tower purchase with proceeds from a mortgage loan and proceeds from the Singapore transaction.
The company’s acquisition run has largely been outside OC recently. Its only area property now is the Von Karman Tech Center, a low-rise office in Irvine, according to the company’s website.
KBS Realty Advisors is run by Charles Schreiber Jr., a former Koll Development Co. executive, and Peter Bren, brother of Irvine Co. Chairman Donald Bren.
2nd Newmark Knight Deal
A deal for City Tower would be the second notable office transaction recently closed in Orange.
Last week, City Centre I, a four-story, 148,054-square-foot office building about a mile from City Tower, traded hands. Property records show it was bought by an affiliate of TA Realty, a Boston-based pension fund adviser, in a $33 million deal, or nearly $223 per square foot.
Equity Office, a division of private equity giant Blackstone, sold it in a deal brokered by Newmark Knight’s Shannon, Jones and Bokosky with colleague Sean Fulp.
City Centre I is on the opposite side of the Garden Grove (22) Freeway from City Tower at 625 The City Drive S. The office is 88% leased to multiple tenants, including Quantum Electronic, The Lasik Vision Institute and Payday Payroll Service Inc.
It was built in 1990, and like City Tower, got a makeover in 2016.
The building is a “recently repositioned institutional-quality asset that offers near-term upside through the lease-up of the vacant space and bringing rents up to market as existing [tenants’] leases roll,” Jones said. “The building is well-positioned and provides the buyer a good basis compared to other recent sales in the immediate submarket.”
Jones’ team worked on another big office sale in central OC in November, the $93.5 million Orange Center Tower transaction in the Platinum Triangle area. The 14-story tower was bought by the local office of Dallas-based Lincoln Property and New York-based Cadre.
