The Anaheim headquarters for teen and young adult fashion retailer Pacific Sunwear of California Inc. has sold in a $44 million deal.
The new sale comes a little more than two years after the company, Orange County’s second-largest retailer by employee count, sold the 180,902-square-foot facility in a move to improve its balance sheet.
This month’s deal marks a 63% premium for the property, compared to the 2017 sale-leaseback deal.
A local private investor bought the office property at 3450 E. Miraloma Ave., and paid about $243 per square foot for the three-story building.
The nearly 8-acre property is a few blocks north of the Riverside (91) Freeway, in the Anaheim Canyon area.
PacSun has 13 years remaining on its lease, according to Newmark Knight Frank’s Paul Jones, who brokered the deal on behalf of the sellers, a venture between Houston-based Hines and Oaktree Capital of Los Angeles.
The deal represents a capitalization rate in the 7% range, according to marketing materials for the property. The 2017 deal’s cap rate was closer to 10%.
The Hines-Oaktree group decided to sell after “finishing the business plan, leaving the property in a much better financial position than when they bought it,” according to Jones. NKF’s Kevin Shannon, Brandon White, Sean Fulp, Ryan Plummer, Mark Schuessler and Matt Berres also worked on the deal.
The deal is among the tops for single-tenant office transactions in OC over the past year, according to Jones.
Private Family Buyers
Michael Hartel at Colliers International represented the buyers, a private family trust affiliated with local investors Bill and Carolyn Klein.
The trust bought the three-story property in a 1031 exchange deal that involved the sale of a 130,000-square-foot industrial property in Santa Fe Springs for $18.5 million. They took out a $30.8 million loan to finance the Anaheim deal, property records show.
The Newport Beach family, which operates under Klein Investments Family, has a sizeable commercial portfolio in the region, with a Southern California presence spanning 750,000 square feet. They typically buy long-term office and industrial properties with strong tenancy, according to brokers.
The Kleins are better known for their support of OC’s arts scene; they’ve been honorary directors for several productions at South Coast Repertory, including recent productions of Moby Dick and Cambodian Rock Band.
The property offers “a strong central Orange County location and a single, long-term tenant who continues to see growth for its brand,” Jones said. “This corporate headquarters building for PacSun provides the buyer a stable and long-term cash flow well into the future.”
PacSun Rebound
The Miraloma building was built in 2002 for PacSun, which was founded in Newport Beach in 1980. The property includes surface parking, a cafeteria, and outdoor sport courts.
The retailer once owned and occupied a neighboring 300,000-square-foot warehouse that served as a distribution center. It sold that property in 2008 for $35 million to Irvine-based Panattoni Development Co. The retailer then relocated its distribution operations to Olathe, Kan., a site it moved out of last year.
The retailer has reported improving financial performance since a 2016 financial structuring.
In 2018, it merged with sister company Eddie Bauer LLC into a new operating company called PSEB Group, which is owned by private equity firm Golden Gate Capital.
Golden Gate said at the time of that deal that PacSun grew same-store sales by 5% in 2017, and 8% for the first half of 2018. Over those two years, its debt level was cut nearly in half, according to news reports.
PSEB hasn’t announced sales results since 2018, when the combined PacSun-Eddie Bauer company counted 700 stores—including 400 PacSun locations—and was expected to do about $1.5 billion in combined sales, including $400 million in e-commerce sales.
Hines Dealmaking
Hines Director Scott Peterson said the “PacSun headquarters was a strong property within our Orange County portfolio given its high-quality central location, access, and tenancy.
“We continue to seek similar assets and corporate partnership opportunities.”
Elsewhere on the sales front, the real estate investor is looking to sell another notable property in Irvine, the Intersect office campus. Hines and Newport Beach-based Pacific Investment Management Co. paid $121.5 million, or nearly $270 per square foot, for the four-building office campus—then called Quintana—in 2015.
After a $27 million investment, rebranding, and strong leasing efforts, the owners are hoping to bring in close to $260 million for the 452,000-square-foot complex, located at the intersection of Main Street and Von Karman Avenue.
