After generating a 45% premium on its sale of the mixed-use Stadium Crossings complex in Anaheim, one of its first area investments, Pendulum Property Partners of Irvine is thinking in and outside of OC for new office and retail deals.
It’s ramping up its own office and employee count to do so.
“With Orange County serving as our solid infrastructure, we have been in expansion mode,” said Pendulum founder Kevin Hayes. Previously managing partner with a day-to-day involvement in growing the OC office, Hayes recently changed his title to CEO to reflect his broader focus within the company as it grows across the Western U.S.
Bryan Russell, a partner who has been with the firm since its inception in 2016, has been tapped to oversee Orange County efforts.
“We are actively seeking new acquisitions,” Russell told the Business Journal last week. “What’s most attractive to us is core plus and value-add office and retail.”
Pendulum last month sold its remaining interest in the 173,200-square-foot Stadium Crossings, a six-parcel property just north of the city’s baseball stadium that’s largely made up of an office building and restaurant space.
It sold the 105,480-square-foot office building for $32.5 million, close to double the $18.7 million that Pendulum paid for the office in 2017.
The office sale comes after Pendulum spent the last several years redeveloping or finding new uses or tenants for the parcels and selling them off to separate private investors.
Pendulum paid $46 million for the entire portfolio in 2017. It sold the parcels for a total of $66.9 million between the first sale in 2018 and the final office sale which closed last month.
Upgrades to the site include redeveloping a vacant bank into a Panera Bread drive-thru location, repurposing another parcel into a new Saddleback Church location; replacing a Fresca’s Mexican Grill location with a Chipotle; and giving the project an overall “facelift.”
Pendulum also fully leased the office building, signing a new long-term deal with a government tenant, the General Services Administration, to occupy half of the property; the County of Orange occupies the remainder.
The complex at 2125 E. Katella Ave. also includes a Denny’s, Carl’s Jr., Starbucks and other fast-casual eateries.
The buyer was Las Vegas-based investor Kingsbarn Realty Capital, which paid nearly $300 per square foot for the building. Newmark represented Pendulum in the sale.
“The office building was the last piece of the puzzle for us,” Hayes said.
Kingsbarn’s been an active investor in OC’s office market the past year, and was part of ventures paying $45.5 million for the Fullerton Towers complex near the end of 2021, and $40.5 million for Lake Forest’s Palm Terrace complex last June.
Pendulum now counts four Orange County assets in its portfolio, including three office projects in Irvine, Huntington Beach and Anaheim, and a retail and office mixed-use property on the Huntington Harbor Marina.
That portfolio is expected to grow this year.
“We are ready to buy,” Russell said, adding that the firm is optimistic about the recent pickup in leasing velocity.
“That’s picked up tremendously. We are in negotiations for deals at one of our assets that will take us to 100% occupancy,” he said.
Russell also oversees San Diego operations from the firm’s Irvine office, situated in Jamboree Center.
Outside of OC, the company recently wrapped two office acquisitions in Los Angeles.
“We continue to be long-term believers in office, though we are still cautious” as the market continues to recover, Hayes told the Business Journal.
Pendulum now counts offices in Orange County, Los Angeles and San Francisco. It plans to open offices in four new markets, with its eyes on the Pacific Northwest, Denver and Phoenix.
“We are actively exploring acquisitions in Phoenix,” Russell said. “We’re expanding in markets with strong market fundamentals and growth potential.”
The firm counts 35 employees and is actively hiring.
“The biggest surprise coming from COVID was not investment opportunities, it was talent opportunities,” Hayes said.