New York-based real estate investor Emmes Group of Cos. looks to have made a mint selling its Michelson office tower earlier this month, after spending the past three years leasing up the high-profile, 19-story Irvine building.
For the other Orange County property in its portfolio—the two-building 4000 MacArthur office complex in Newport Beach—Emmes thinks it can get the best out of its investment by emptying one of the two buildings, at least temporarily.
Emmes held an open house for the 4000 MacArthur complex earlier this month, showing off a new façade and upgraded lobby for the buildings, among other renovations and improvements for the property. The complex—a pair of 10-story office buildings at MacArthur Boulevard and Jamboree Road—is part of the Koll Center Newport development near John Wayne Airport.
The two buildings have about 377,000 square feet of office space in total, and they hold the headquarters of two of OC’s better-known chipmakers, Conexant Systems Inc. and spinoff Mindspeed Technologies Inc.
Regulatory filings show Conexant occupying about 97,000 square feet at the complex’s west tower. The company also has its name on top of the building.
Mindspeed occupies a little more than 88,000 square feet at the complex’s east tower after signing a lease renewal deal earlier this year and also has its name atop that office.
Almost all of the space in the complex’s west tower—up to 180,000 square feet of space—is now being marketed for lease, along with building top signage. What that means for Conexant’s role as a tenant at the complex hasn’t been disclosed, nor a time frame for any potential moves.
Both buildings could see a change in occupants, based on marketing materials shown at the open house for brokers and other real estate executives.
Brokers not directly involved with the property said Conexant could move into the east tower along with Mindspeed if another tenant were willing to lease a majority of the entire west tower.
Filings with the Securities and Exchange Commission show Conexant is operating under a 10-year lease at 4000 MacArthur that’s set to expire in 2015.
Conexant previously owned both buildings, but in 2005 the chipmaker signed a sales-leaseback deal with Newport Beach-based KBS Realty Advisors LLC, which paid $110 million for the two-building complex.
New York-based Tishman Speyer Properties LP paid KBS about $134 million, or $365 per square foot, for the two office towers in 2006.
In 2011 Emmes reportedly bought a $40 million junior portion of a $100 million mortgage tied to the property for 80 cents on the dollar and moved to foreclose on the property from Tishman. It took over the property later that year in a deal valued at around $94 million, or about $249 per square foot.
That’s roughly one-third of the price—and half the price per square foot—that Emmes just sold its 536,000-square-foot Michelson tower to Manulife Financial Corp. of Canada (see story, page 1).
The sale of the Michelson, estimated to have sold for at least $270 million, is OC’s priciest commercial real estate transaction of the year. Emmes paid about $160 million for the Park Place office, which opened in 2007, a little more than three years ago.
A move or relocation of Conexant’s offices at 4000 MacArthur would be the latest in a series of area real estate deals by the chipmaker.
Along with the 2005 sale of the complex to KBS, Conexant also sold off a 25-acre parcel of land next to its headquarters, plus two buildings, in a $23.5 million deal that closed near the end of 2010.
The buildings sold total about 450,000 square feet of space and include a production plant used by Israel-based Tower Semiconductor Ltd.
The buyer in the 2010 deal was Uptown Newport LP, a venture that includes a fund controlled by New York-based DRA Advisors LLC and an affiliate of Irvine real estate investor Shopoff Group LP. Conexant retained a small stake in the property, according to regulatory filings.
Uptown Newport aims to turn the property into a residential development.
