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Monday, Nov 28, 2022

Lincoln, Angelo Gordon Pay $160M for Offices

An eight-building portfolio of office buildings in Newport Beach and Irvine has sold for about $160 million, the most expensive Orange County office transaction so far this year.

A partnership between the local office of Dallas-based Lincoln Property Co. and Angelo Gordon & Co., a New York-based private equity firm, recently completed the purchase of the midsize properties in the John Wayne Airport area.

The buildings total a little more than 520,000 square feet, and sold for about $307 per square foot.

The deal includes four office complexes; two in Newport Beach, the other two in Irvine.

The Newport Beach properties include Redstone Plaza, a two-building office project near the intersection of MacArthur Boulevard and Dove Street totaling 171,173 square feet, and 1201 Dove St., a nearby six-story office totaling 82,006 square feet.

The Irvine properties include Inwood Park, a three-building, three-story office campus at the corner of McGaw and Redhill avenues running 160,683 square feet, and Newport Summit, a two-building complex next to the Google Center office campus on Jamboree Road whose three-story office buildings total 107,371 square feet.

The offices are about 82% leased combined, according to Parke Miller, executive vice president of Lincoln’s Costa Mesa office.

The properties were sold by Chicago-based Equity Office Management LLC, a unit of New York-based private equity giant Blackstone Group LP.

More Upside

The deal marks Angelo Gordon and Lincoln’s most notable Orange County joint investment since 2010, when they partnered to buy Griffin Towers, a two-tower office complex in the South Coast Metro area of Santa Ana. Made in the wake of the Great Recession, the deal was for a little under $90 million. They sold it in 2014 for $129 million to Equity Office.

There’s still room for area offices to appreciate, even if it’s the later stages of the current market cycle, according to Miller.

Orange County “never had a boom of a recovery; it’s been slow and steady,” he said. “We’re optimistic the Class A market here still has room to grow.”

The partners, in particular Lincoln, have been active investors in Orange County since selling Griffin Towers but have since made only one other deal together, a $30 million buy in Laguna Hills two years ago.

Among its notable recent acquisitions, Lincoln bought another airport-area tower in July, 1500 Quail St. in Newport Beach, a seven-story office of 90,715 square feet.

It paid about $32.1 million, or $354 per square foot, in a deal with an undisclosed financial partner.

The $160 million portfolio and the Quail Street acquisition, “really complements each other,” Miller said.

Lincoln has also been an active investor in the Platinum Triangle area of Central County, snapping up a few buildings, including the 14-story Orange Center Tower last year for $93.5 million.

The company has spent over $350 million on Orange County office properties over the past three years, according to Business Journal records. It now has a local portfolio of owned and managed properties totaling about 5.3 million square feet.

Flight Arriving

Another sign of Lincoln’s bullishness on the area office market is that it’s also among OC’s top office developers, with the first phase of the Flight creative-office project in Tustin now more than a year into construction.

The project’s first phase is about 400,000 square feet of offices, in addition to a food hall and conference center.

Construction on the core and shell of the first buildings should be finished by early next year, Miller said.

Lincoln, which is developing the project in a venture with Boston-based real estate private equity firm Alcion Ventures, hasn’t announced occupants for Orange County’s first ground-up creative office campus. Mess Hall Market, a 12,000-square-foot food hall, is slated to be one of the first spaces to open.

Frequent Flips

The four properties Lincoln and Angelo Gordon just closed have had multiple ownership changes over the past 11 years.

Landlords since 2007 have included Newport Beach-based Bixby Land Co., Los Angeles-based Maguire Properties Inc., and New York-based insurer American International Group Inc. Affiliates of Blackstone Group owned the buildings twice during the period.

The buildings’ value was nearly $422 per square foot when Bixby Land bought them. Their value dropped after the recession to about $200 per square foot when AIG took them over in a foreclosure-driven deal in 2011.

Lincoln managed the properties while they were under AIG’s ownership, and Miller said he believes the experience gave his firm insight into ways the property could be operated better and more profitably under the current partnership with Angelo Gordon.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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