Tower Semiconductor, which operates the largest chipmaking facility in Orange County, says it has reached a deal to extend the lease for its Newport Beach plant.
The deal marks one of the biggest lease transactions in OC this year, by dollar value.
The Israeli-based chipmaker (Nasdaq: TSEM) disclosed this month that it has extended its lease at its 320,000-square-foot wafer chip facility just off Jamboree Road, near the Newport Beach-Irvine city line.
The site, home to hundreds of workers, has been used by the chipmaker for years under various ownership structures and names, including Jazz Semiconductor and TowerJazz.
The property is owned by an affiliate of Irvine-based developer Shopoff Realty Investments, which bought it and several adjacent parcels, totaling about 25 acres, in 2014 for what’s now the Uptown Newport housing project.
The site that now holds Tower’s facilities is earmarked for the last construction phase at the ongoing, multi-billion-dollar residential development.
Tower’s lease had been slated to end in March 2027, but the company said on Nov. 10 that its extension pushes that date back another 3.5 years.
High Rent District
The deal is a pricey one for Tower, whose Newport Beach facility includes 120,000 square feet of clean room space.
For the five years running from now until the end of the new lease, the company will be paying an average of $24 million a year in rent for the site, it said in regulatory filings.
That works out to average monthly rents of $6.25 per square foot, more than double the going rate for office and manufacturing space in the area around John Wayne Airport.
Tower’s making an upfront lease payment of $105 million as part of the deal, officials told analysts on a Nov. 10 conference call.
Tower officials also said they planned additional investments for their local facility, which is one of six semiconductor plants it operates worldwide, “to address the continuous and growing 5G demand and given the full utilization” of the OC site currently.
The Newport Beach facility “specializes in specialty process technologies of silicon photonics, analog and mixed-signal semiconductor devices,” the company said.
Tower customers use wafers made at the plant for devices for high-speed data, communications, cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems, it says.
The fate of Tower’s Newport Beach operations has been in flux for years.
In 2018, Shopoff initiated litigation against the chipmaker, alleging that it had violated noise-abatement terms established during a prior lease extension.
Litigation regarding this issue is still ongoing, and a lease extension beyond 2030 is not expected.
In 2022, Intel Corp. announced plans to buy Tower for $5.4 billion; however, the transaction was called off in 2023 after Intel (Nasdaq: INTC) was unable to obtain overseas regulatory approvals for the deal.
Shares in Tower are up nearly threefold since the Intel deal collapsed; it now sports a market cap of about $11 billion.
