Orange County’s first and largest ground-up creative office campus, Tustin Legacy’s Flight, has a new ownership structure after a recapitalization that brought in a new main investor to the project.
Glendon Capital Management LP, a Santa Monica-based hedge fund, recently took a majority stake in the six-year-old campus, joining prior investor Lincoln Property Co.
Glendon replaces Boston-based private equity firm Alcion Ventures as the primary investor in Flight, a nearly 19-acre campus where space tourism firm Virgin Galactic is a key tenant. Lincoln Property is also reinvesting in the site and is continuing to serve as its property and asset manager.
Value Holding Up
Property records indicate that the transaction values Flight, which comprises eight buildings totaling 455,000 square feet of office space, a conference and events center, and the 12,000-square-foot Mess Hall food court, at just under $200 million.
Such a deal places the campus’ value at around $420 per square foot, more than double the PSF valuation of many other higher-end office properties in OC that have traded hands this year.
The company’s amenities and design, with floorplates much larger than traditional office buildings, justify the valuation, with the campus’ occupancy outpacing the market as a whole, according to Parke Miller, Lincoln Property EVP and head of the firm’s OC operations.
Flight exemplifies the ongoing ‘flight to quality’ trend in the office sector, and partnering with Glendon will allow us to continue enhancing its long-term value for tenants and the broader community,” Miller said.
Financing for the transaction was provided by LoanCore Capital and brokered by JLL Capital Markets.
85% Leased
Flight opened in 2019 near the intersection of Barranca Parkway and Red Hill Avenue, along the Tustin and Irvine city line.
It features a mix of larger multi-story offices ranging from about 90,000 to 145,000 square feet, along with a collection of smaller, single-tenant office buildings topping out at about 13,000 square feet.
Despite the pandemic-induced headwinds it faced shortly after opening, Flight was able to boost occupancy to nearly 97% by late 2022, Miller noted.
Besides Virgin Galactic (NYSE: SPCE) – whose headquarters at Flight run nearly 100,000 square feet – other large tenants include dental benefits firm Liberty Dental Plan and Vesync, a maker of smart home appliances and devices previously known as Etekcity.
New additions include HP’s gaming and esports division, HyperX.
The project has seen a few departures over the past year, such as discount retailer 99 Cents Only Stores, which wound up its operations last year and shuttered its HQ at the campus, and phone case maker Incipio. Those departures brought down occupancy at Flight to 85% at the time of the recapitalization.
Matt Didier and Justin Hill of CBRE are managing leasing for the property, which currently counts more than 30 tenants.
Attractive Valuation
Glendon was founded in 2013 by a trio of former executives at private equity giant Oaktree Capital. It is reported to manage about $5 billion in assets. It says it focuses on “distressed credit and special situations opportunities,” with investments in a variety of asset classes, including commercial real estate.
The hedge fund’s investment in Flight “reflects our conviction in the current market opportunity to acquire top-tier real estate assets at attractive valuations,” said Christopher Delaney, partner at Glendon.
“With a new, stronger, and more flexible capital structure, we believe Flight is well positioned to attract and retain high-quality tenants seeking a differentiated, well-amenitized workplace environment for their employees.”
