A five-story office on the former Washington Mutual Inc. campus in Irvine has traded hands for nearly three times its value of five years ago.
Clarion Partners LLC, a New York-based real estate investment manager, recently closed on the purchase of the 151,370-square-foot building at 17885 Von Karman Ave. a few blocks from John Wayne Airport.
Terms of the deal were not immediately disclosed and the parties involved in the sale declined to comment.
Industry sources said the nearly full building traded hands for about $59 million, or nearly $390 per square foot.
A venture between Oaktree Capital Management LLC, a Los Angeles-based private equity firm, and Hines Interests LP in Houston sold the building. The venture had paid a reported $20 million in 2010 for a loan tied to the office when it was about a third occupied and subsequently took over its ownership.
The building now holds Pasadena-based engineering and consulting company Tetra Tech Inc., and Saratoga Springs, N.Y.-based financial services firm Ayco Co. LP among its largest tenants. The office is about 95% leased.
Brokers with CBRE Group Inc. who worked on the deal said the latest transaction marks the first significant sale of a high-end, fully leased large office in Orange County since 2012.
More in Store?
More deals of this type in the area are possible, especially as positive leasing trends continue to improve and investors look to OC for attractively priced deals, they said.
“Orange County continues to be an attractive basis market compared to West Los Angeles, Seattle and the San Francisco Bay Area,” said Kevin Shannon, CBRE vice chairman who worked on the deal with colleagues Paul Jones, Ken White, and Blake Bokosky.
The sale “is still below peak pricing and replacement cost for Orange County, unlike core deals in those other coastal gateway markets,” said Shannon.
The estimated $59 million price tag makes it the second most expensive office sale in OC in 2015, not including properties slated for tear down and conversion to apartment uses, according to Costar records.
The purchase is the second notable local acquisition involving Clarion Partners this year.
Pacific Industrial
In February, the company announced it had partnered with Pacific Industrial, a Long Beach-based industrial development firm, to buy a 17.7-acre development site on W. Imperial Highway in Brea. The property sold for $28.5 million, according to brokerage reports.
The two companies are planning to build a 367,194-square-foot logistics and distribution facility at the Brea site, which is about two miles west of the Orange (57) Freeway near the intersection of Imperial and Puente streets.
A building of that size would be among the eight largest industrial facilities in Brea, according to property records.
Clarion counts nearly $36 billion in total assets under management, according to the company’s website.
The 17885 Von Karman Ave. office was built by now-defunct landlord Maguire Properties Inc. of Los Angeles in 2007.
It’s the newest of five buildings at Irvine’s Quintana office campus, which once held the local operations of Washington Mutual. The campus was largely vacated following the 2008 departure of tenant Washington Mutual during the mortgage industry’s implosion.
Palo Alto-based real estate investor Menlo Equities LLC has owned the other four buildings at the campus, which total about 415,000 square feet, since 2010. Those buildings have remained largely vacant the past few years.
Menlo Equities
A sale of those four buildings by Menlo Equities is expected soon, at a price approaching $300 per square foot or $125 million, according to industry sources. Brokers with the local offices of Cushman & Wakefield Inc. and HFF LP have the listing for that property.
Value-add investors looking to scoop up properties with large chucks of vacancies—as well as buyers looking for more stabilized assets such as 17885 Von Karman—are homing in on OC right now, according to CBRE brokers, who this month worked on the sale of Pacific Center, a two-building office complex totaling 392,877 square feet in Santa Ana.
That property—bought by Costa Mesa’s Brookhollow Group at an estimated price of more than $40 million —will be empty following the departure of Ingram Micro Inc. and other tenants.
“Capital continues to be very optimistic on the rent growth in Orange County, and the market is moving very quickly,” said CBRE’s Jones, a first vice president in the brokerage’s Newport Beach office.
“We anticipate pricing to continue to climb and expect class-A rental rates to eclipse $3 (per square foot) by the end of the year—numbers we have not seen since pre-recession,” Jones said.
Monthly rents for OC’s higher-end buildings in the airport area now average about $2.95 per square foot.
Oaktree
The sale of the 17885 Von Karman Ave. building is the first major disposition by Oaktree since it returned to OC’s commercial real estate market as a buyer about five years ago.
Since 2010, the L.A.-based investor—which manages close to $75 billion in assets—has bought several million square feet of office space in the county, primarily in ventures with the local office of Hines.
The two companies also are working together on an office development planned for the opposite corner from the Quintana campus at Main and Von Karman.
That proposed nine-story, 242,000-square-footsquare foot project, at 17850 Von Karman, will see some early-stage work begin in about a month, according to the developers.
Hines and Oaktree also partnered in the largest office sale in OC this year, a deal that brought an estimated $120 million for the two-building campus at 4000 MacArthur in Newport Beach. That deal was announced shortly after Hyundai Capital America Inc. was signed as a new tenant for one of the two buildings there.
