The Freeway Corporate Park office campus next to the Costa Mesa (55) Freeway in Santa Ana sold for $24 million in the latest big commercial property sale on a busy stretch of the freeway.
A Newport Beach affiliate of Boston-based institutional pension fund adviser TA Realty LLC purchased the two-building property at 2501 S. Pullman St. and 1700 E. Carnegie Ave. The campus totals 128,266 square feet.
It’s a few blocks west of the Tustin Legacy development site and is considered part of the Irvine Business Complex submarket.
The buildings hold the headquarters of Iteris Inc., a maker of sensors and other traffic gear that leases more than 40,000 square feet there.
Orange County Head Start Inc., the local affiliate of one of the country’s largest child development programs, is also headquartered in the offices, where it leases more than 25,000 square feet.
Other tenants include Abbott Medical Optics, Advantage Sales and Marketing and Bendix. The property is more than 90% leased, with no tenant rollover until 2017, according to brokerage data.
The purchase price works out to about $187 per square foot for the property, which was sold by a partnership between Rialto Capital Management LLC of Miami and San Diego-based Cypress Office Properties LLC in a deal brokered by CBRE Group Inc.
The sellers had owned the campus for less than two years. Rialto Capital, a real estate investment division of Miami-based homebuilder Lennar Corp., and Cypress Office paid $16 million for it in May 2013 and then upgraded the property.
There’s still room for the new owners to get meaningful gains themselves, thanks to projected upticks in rents, despite the $8 million increase in price in the complex’ value over the past two years, according to CBRE brokers who worked on the latest deal.
The office market around John Wayne Airport “is one of the most active submarkets in Orange County with more than 2 million square feet of positive net absorption over the past 15 months and a projected increase of more than 25% over the next five years,” said Paul Jones, a first vice president for CBRE’s investment property group.
“Freeway Corporate Park is well-positioned to benefit from this demand and from increasing lease rates that are starting to materialize in a meaningful way across the Orange County office market,” said Jones, who worked with colleagues Kevin Shannon, Bob Smith and Blake Bokosky on the deal.
The OC office market’s asking lease rates grew 3.4% in the first quarter, ending at $2.12 per square foot, according to CBRE data. That’s the largest quarterly increase since 2007. Lease rates are up about 7.6% on a year-to-year basis, according to the brokerage.
Busy Area for Sales
The Freeway Corporate Park sale adds to a string of notable real estate deals for properties along the 55 this year.
Buildings next to the freeway, in particular a roughly three-mile stretch between the San Diego (405) and Santa Ana (I-5) freeways, have been among the most active locations for local property sales so far this year.
More than $150 million in office, industrial, apartment and hotel deals have closed within a block of the stretch, an area whose buildings fall within either the Irvine, Tustin or Santa Ana city limits.
Other notable office deals in the vicinity reported to close this year include the $19.7 million sale of the Red Hill Technology Center in Santa Ana and the $9.6 million sale of the 1063 McGaw Ave. building in Irvine.
Tustin Pacific Center, a two-hotel project along the 55 that was opened by Irvine-based R.D. Olson Development in 2013, was sold to a hotel investor this year for nearly $74 million.
One of the area’s largest apartment transactions so far this year also took place in the area: the estimated $33 million sale of the Estrella Apartments in Tustin.
