The Michelson office tower in Irvine, which traded hands three years ago in what’s believed to be the priciest single-building office sale ever in Orange County, is about to get a lot more interest from Asian investors.
Toronto-based Manulife Financial Corp. is said to be packaging the 19-story trophy property, along with two other buildings it owns in the U.S., in an initial public offering that will be listed on the Singapore Exchange, or SGX.
The offering, described in foreign press reports as the Manulife US REIT, is expected to list its shares in mid-July. The real estate investment trust will have a market capitalization of about $490 million and will raise about $440 million in the IPO, according to those reports.
Manulife will retain a 9.5% stake in the REIT after the IPO, according to reports. It will be the first-ever REIT listed on the Singapore Exchange that focuses on U.S. properties.
Financial documents related to the pending offering were not listed with the SGX as the Business Journal went to press.
The Michelson tower is the most valuable of the three offices that are being packaged in the IPO, according to press reports in Asia, which say a roadshow for the pending IPO is under way.
The other properties include an office tower Manulife owns on South Figueroa Street in Los Angeles and an office in Washington, D.C.
Manulife, a financial services company best known in the U.S. for its John Hancock Life Insurance Co. division, paid a reported $277 million for the 536,000-square-foot Michelson tower in 2012.
No other single-building office properties in Orange County are known to have sold at a price above $200 million.
The office was built in 2007 and is in the Park Place mixed-use campus near John Wayne Airport.
Tenants at the building include Hyundai Capital America, which has its name atop the office; Fitness International LLC; Jacobs Engineering Group Inc.; and law firms Gibson, Dunn & Crutcher LLP, Greenberg Traurig PA, Jones Day and Bryan Cave LLP.
The Michelson comprises about 43% of the $723 million net asset value of the three buildings that will be part of the Manulife IPO, according to a report in trade publication FinanceAsia. That puts a $310 million valuation on the building—a 12% increase since the 2012 sale—or nearly $580 per square foot.
Manulife—which also bought the 12-story Oracle Tower in Irvine last year for about $94 million—is listing the properties in Singapore in an effort to build its brand in Asia, reports said.
Singapore is Asia’s top destination for REIT listings, with about 90, and the offerings tend to “target Asian investors hunting for stable cash flows and higher-yielding assets amid paltry yields on offer in the bond market,” according to the Wall Street Journal.
The debt on the three Manulife buildings being listed runs about 10 years on average at a rate of 3.75%, according to news reports in Asian markets.
Rents at the three buildings, which are close to being fully leased, will grow at an average rate of 4.8% through 2016, according to those reports.
