San Francisco-based commercial real estate investor Drawbridge Realty has made its second Orange County office purchase in as many years, picking up the Lake Forest headquarters of Panasonic Avionics Corp.
A third, larger office deal in South OC could also be on the way for the privately held firm, according to recent real estate market chatter.
Drawbridge, a real estate investment company that’s backed in part by New York-based private equity firm KKR & Co., recently completed the purchase of 26200 Enterprise Way, a two-story building in Lake Forest off Bake Parkway near the Foothill (241) Toll Road.
The nearly 145,000-square-foot property traded hands for about $32.4 million, or $223 per square foot. It was sold by a real estate investment affiliate of Springfield, Mass.-based fund manager Barings LLC, which paid nearly $28.3 million for it five years ago.
Panasonic Avionics, an in-flight entertainment system manufacturer and a unit of Secaucus, N.J.-based Panasonic Corp. of North America, occupies the entire building for its main corporate headquarters.
It has a lease that runs until early 2022, according to marketing materials from the Irvine office of Cushman & Wakefield Inc. Jeff Cole, Ed Hernandez, Nico Napolitano and Jay-Paul Lowry brokered the latest sale to Drawbridge.
The office is one of seven buildings in the vicinity that Panasonic Avionics leases for local operations. The buildings total about 600,000 square feet, are on about 18 acres, and owned by a variety of landlords.
Panasonic has put in millions to upgrade the buildings that comprise its Lake Forest campus, increasing the likelihood that the company will extend its lease at 26200 Enterprise over the coming years, according to Cushman’s marketing materials
Panasonic Avionics is the second largest employer in Lake Forest, with more than 1,700 workers.
The “company has flourished in this location based on its access to highly educated employees, engineers, and executives and the attractive yet affordable South Orange County coastal lifestyle,” Cushman & Wakefield’s marketing materials note.
The Lake Forest building is the second investment in OC since last year for Drawbridge Realty, whose companywide portfolio totaled about 3 million square feet two years ago.
The company focuses much of its investments on buildings leased to large corporate users, with an emphasis on strategic operating facilities.
That was the case for its May 2016 purchase in the area, when it paid $37 million to buy 1700 E. Saint Andrew Place, a three-story office a few blocks from the Costa Mesa (55) Freeway.
The Santa Ana building is fully leased to Abbott Medical, a maker of laser vision technologies and a unit of Chicago-based Abbott Laboratories.
The device maker has been at the location for about 14 years and has a lease there that expires in mid-2022.
Abbott Medical’s 171,330-square-foot building sold for about $216 per square foot.
Pacific Vista?
The nearly $70 million that Drawbridge Realty has spent for buildings in OC since last year could turn out to be a precursor to an even larger transaction rumored to be in the works.
Real estate sources point to the company as the likely buyer of Pacific Vista, a five-building office park up for sale in Lake Forest that totals 322,262 square feet.
The buildings, at the intersection of Bake Parkway and Enterprise Drive, are also owned by an affiliate of Barings, which sold the 26200 Enterprise building. It paid a reported $59 million for the campus five years ago.
A price closer to $80 million is anticipated for the campus this time around, according to sources familiar with the impending transaction.
The buildings are listed for sale by the local capital markets team of Newmark Knight Frank, which also worked on the 2012 sale to Barings.
Brokers there declined to comment on the status of the sale.
Pacific Vista is leased to a variety of tenants, and its buildings are about 90% leased on average, according to CoStar Group Inc.
Tenants include eyewear maker Oakley, which has its headquarters about two miles away in the Foothill Ranch section of the city and is Lake Forest’s largest employer, with more than 2,000 workers.
Other tenants at the office park include the City of Lake Forest, Viant Inc., Aurora Bank FSB and US Real Estate Services.
The rising prices seen for the two Lake Forest properties that Drawbridge has bought and is expected to buy soon reflect improving office market conditions in the region.
South OC’s office market has a vacancy rate of just 5.5%, down from 7% a year ago. Asking rents there have increased 30% over the past two years, according to Cushman & Wakefield. It’s one of the tightest office markets in the country, according to the brokerage.
