A 10-story office building in Newport Beach is the latest property to get snapped up by institutional investors bullish on Orange County’s improving economy.
The 10-story office at 1301 Dove St.—about a mile from John Wayne Airport—was acquired this month by an affiliate of Madison, N.J.-based Prudential Real Estate Investors.
The investment division of Newark, N.J.-based Prudential Financial paid nearly $73 million—about $360 per square foot—in a deal brokered by the local office of HFF LP.
The 202,000-square-foot office is about 86% leased, according to HFF marketing materials.
Another insurance company, Alliant Insurance Services Inc., is the building’s largest tenant.
Alliant also is the largest insurance brokerage based in Orange County and ranks No. 24 among private companies based here, with more than $600 million in annual revenue.
Alliant leases about 55,000 square feet and keeps its headquarters at the building.
HFF LP’s marketing materials note that the 1301 Dove building is one of six offices in Newport Beach larger than 125,000 square feet that’s not owned by Irvine Company.
Metropolitan Life Insurance Co. sold the building, according to CoStar Group Inc. records. It had paid a reported $45 million for the office in 2004.
OC Investment
The deal adds to a string of big OC commercial real estate investments by Prudential Real Estate Investors and its affiliates that have collectively come to more than $450 million.
The investor disclosed in April that it had acquired a 75% stake in the Bella Terra shopping center in Huntington Beach. It paid nearly $289 million for its stake in the 840,000-square-foot center, according to CoStar records.
San Jose-based DJM Capital Partners Inc., which has owned and operated the shopping center since 2005, retained the remaining 25% stake in Bella Terra in that deal.
Prudential Real Estate Investors paid $93.7 million last year for One Pacific Plaza, the office complex that’s next to the Bella Terra shopping center.
‘Wind Is at Our Back’
The 1301 Dove sale also adds to a string of big OC office sales to close in the past month in deals largely prompted by the improving market fundamentals in the area’s office market, according to HFF Senior Managing Director Ryan Gallagher.
“The wind is at our back right now,” said Gallagher, who brokered the deal with colleagues Michael McCann, Derreck Barker and Tim Geiman.
HFF brokers were part of the team that worked on this month’s sale of the Quintana office campus in Irvine. The office was acquired by a venture between Houston-based Hines Interests LP and Pacific Investment Management Co. in Newport Beach.
The four-building, 430,000-square-foot Quintana campus—once the local hub of Washington Mutual Inc.—is believed to have traded hands at a price approaching $120 million.
HFF also worked on this month’s $49.4 million sale of Foothill Plaza, a two-building complex in Foothill Ranch (see Real Estate column, page 85).
Institutional Investors
Institutional investors such as Prudential Real Estate Investors, PIMCO, and Santa Monica-based Cornerstone Real Estate Advisers, which bought Foothill Plaza, are attracted to OC’s increasingly varied and expanding tenant base, which has finally recovered from the last mortgage downturn, according to Gallagher.
“It’s a much more diversified rent roll” than before, he said. “It’s been a long time coming.”
Investors also like the fact that OC is one of the few big national office markets where higher-quality buildings can be acquired at prices below their replacement costs, Gallagher said.
The 1301 Dove office has an estimated replacement cost in excess of $550 per square foot—topping $110 million—according to marketing materials for the building.
A few other notable airport-area offices are on the market and expected to generate interest from institutional investors.
5000 Birch—a two-building office complex in Newport Beach about a mile from 1301 Dove that totals nearly 300,000 square feet—is on the market, as is 18201 Von Karman, an 11-story office in Irvine that’s a few blocks from the airport. HFF has the listing for those two properties.
