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Wednesday, Jun 7, 2023

Santa Ana Offices Sell for $97M

Santa Ana’s office market continues to be a prime source of large local deals this year, after the two-building Pacific Center complex in the city traded hands for about $97.5 million.

San Francisco-based commercial real estate investor Drawbridge Realty Management LLC bought the 390,600-square-foot complex, just off the Costa Mesa (55) Freeway on Saint Andrew Place.

Pacific Center sold for about $248 per square foot; it’s the second-largest office sale in Orange County this year, trailing only the $113 million sale of a portion of Boeing Co.’s Huntington Beach operations in March, according to records from real estate market tracker CoStar Group Inc.

The offices that Drawbridge is buying are about 85% leased to four tenants. Companies at the campus include home mortgage lender Mr. Cooper, formerly Nationstar Mortgage LLC; it is the lone tenant at 1600 E. Saint Andrew building, which runs about 188,000 square feet.

Three other companies are at the nearly 203,000-square-foot 1610 E. Saint Andrew building: Advantage Sales & Marketing, Collectors Universe Inc., and CNI College.

KKR Backing

Drawbridge, a real estate investment company that’s backed in part by New York-based private equity firm KKR & Co., has familiarity with the immediate area. It also owns the next-door 1700 E. Saint Andrew Place building, a three-story office that’s occupied by Johnson & Johnson Vision, which previously operated as Abbott Medical Optics.

Drawbridge paid $37 million in 2016 for that 171,330-square-foot building, or about $216 per square foot.

The investor now “controls more than 34 contiguous acres in an Opportunity Zone, which offers favorable tax benefits to owners,” said Paul Jones, executive managing director with the Newport Beach office of Newmark Knight Frank, whose brokers represented the seller, a joint venture comprised of Costa Mesa-based Brookhollow Group and its longtime financial partner Los Angeles-based PCCP LLC; Drawbridge was self-represented.

“We were drawn to this specific property due to our existing asset next door,” said Drawbridge Vice President Chris Elmendorf. “Being able to control more product in any one location is an intelligent move, especially in a high barrier to entry market like Orange County.”

Pacific Center is the company’s fourth Orange County investment, and brings its local portfolio to north of 1 million square feet. All of it has been acquired since 2016; it also owns two properties in Lake Forest, including a facility leased to Panasonic Avionics as part of its corporate campus in that city.

Its recent OC purchases total about $243 million.

Much of Drawbridge’s assets are single-tenant U.S. office and R&D buildings. In June, it was reported that KKR & Co. led a nearly $240 million fundraising effort for the company.

“We think Southern California is a great place to make long-term acquisitions, and we plan to continue targeting corporate campuses in Orange County,” said Elmendorf.

Quick Return

This month’s sale is more than double the price Brookhollow Group paid for Pacific Center in 2015.

The investor paid $43.9 million, or $111.74 per square foot, for the complex at the time. Its primary tenant, Ingram Micro Inc., was in the process of relocating its headquarters to the Park Place campus in Irvine.

At the time, the IT distribution firm’s departure created one of the largest contiguous blocks of office vacancy in the county.

Brookhollow invested about $3.5 million in upgrades in 2017 at the property, which is on about 24 acres and has nearly 2,100 parking spaces.

The new owners said they plan to invest additional funds to update the remaining vacant spaces at the property—about 50,000 total square feet—with CBRE Group Inc. handling leasing.

Santa Ana Center

The Pacific Center deal marks the third office sale in Santa Ana to top the $50 million mark since May, the most of any city in OC over that time.

Both the 1 and 2 MacArthur offices a few miles away were recently snapped up for a combined $137 million by Ocean West Capital Partners and Angelo Gordon, the top two office sales of the second quarter (see page 38).

Elmendorf said the local market has “a well-diversified, vibrant economy and high residential desirability.”

“Pacific Center offers strong, long-term value for Drawbridge and we’re excited to add it to our growing national portfolio,” Elmendorf said.

Including its new asset, Drawbridge owns about 560,000 square feet of office space in Santa Ana.

In total, Drawbridge has a portfolio of 49 properties totaling over 5 million square feet.

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