San Francisco-based MetLife Investment Management has taken over ownership of the two-tower 4000 MacArthur office campus in Newport Beach, following the largest reposted default on a loan tied to an office property in the airport area in more than five years.
MetLife Investment paid $70 million, via the assumption of a loan, for the office campus located at the intersection of Jamboree Road and MacArthur Boulevard, less than a mile from John Wayne Airport, according to a trustee deed obtained by the Business Journal.
That’s well below the requested $108 million loan that was still outstanding on the property, and a far cry from the $176.5 million last paid for the offices in 2017.
The institutional investment manager completed its lender takeover of the property, where Hyundai Capital America was once a tenant, with Agoura Hills-based Beacon Default Management Inc. acting as trustee. The trustee deed showed the property was in default, with an unpaid debt of $108.5 million. A payment of $70 million was made as part of the lender takeover of Koll Center Newport.
“Beacon Default Management Inc. conveyed this 376,781-square-foot office portfolio—comprising the East Tower and West Tower of Koll Center Newport—to MetLife Investment Management via trustee’s deed upon sale following a recorded default,” according to CoStar.
The previous owner, HG Newport Owner, according to state business filings, lists 845 Texas Ave., Suite 3300, Houston, as its principal address. That address is also the headquarters for Hines, a real estate developer that CoStar lists as the office campus’s property manager.
The last reported transaction for the property, according to CoStar, shows New York-based The Goldman Sachs Group Inc. buying the two-building office campus from Houston-based Hines in October 2017 for $176.5 million, or $468.44 per square feet.
“The sale is a recapitalization of the asset in which Hines brought in a joint venture partner, Goldman Sachs, to replace their existing partner, Oaktree Capital, while Hines kept a 5% interest and Goldman Sachs owns 95% in the property,” CoStar said about the 2017 transaction.
Goldman Sachs didn’t return calls for comment last week.
A Hyundai Capital America spokesperson told the Business Journal that the company’s signage on one of the buildings would soon be removed.
Koll Center Newport was developed by The Koll Co. in 1979. The West Tower is a 10-floor building with 177,925 square feet. The East Tower is also 10 floors tall with 198,856 square feet of office space.
Stadium Collections LLC designed the buildings.
Newport Beach’s Office Market
While the Koll Center Newport has a Newport Beach address, the office campus is considered part of Orange County’s Airport Area market.
The Airport Area has higher vacancies than Newport Beach’s other office market, which is Fashion Island.
Martin Pupil, a director at Stream Realty Partners, said the Airport Area has double-digit vacancies.
“There’s more leasing activity, which is great,” Pupil said about the Airport Area market.
Offices in the Airport Area, according to Pupil, are 18.7% vacant. Koll Center Newport’s West Tower is 60% vacant. East Tower is 24% vacant.
Demand for office space could increase in the near future.
“Leasing prospects for quality office space are improving as demand rises from both organic growth and return-to-office mandates, while the supply continues to shrink due to building conversions for residential, industrial, and medical uses,” Taylor Friend, a senior vice president at CBRE’s Orange County office, said.
