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Wednesday, Feb 21, 2024

$70M Foreclosure Auction for Heights Campus

The Heights, a five-building, 489,817-square-foot office complex in Aliso Viejo, has seen its lender take over the property via a foreclosure auction, trading hands for less than half its prior valuation.

The collection of high-end midrise offices is now in the hands of Los Angeles-based commercial real estate debt manager Acore Capital, which paid $70 million and was the highest bidder at a recent auction, according to property records.

The deal works out to around $143 per square foot for the five buildings.

Rockpoint, a Boston-based real estate investor, was the prior owner of the complex. It bought the offices five years ago for $157 million, or nearly $327 per square foot, with financing from Acore.

Property records indicate there was nearly $132 million of unpaid debt tied to the property at the time Acore took over the complex.

The Heights’ buildings—at 65, 75, 85, 95 and 101 Enterprise—are next to the San Joaquin Hills (73) Toll Road near the Town Center at Aliso Viejo shopping center and the Renaissance ClubSport hotel and fitness center.

Tenants at the complex include Microsoft, Vialase, NuVasive and the General Services Administration, according to data from real estate market tracker CoStar Group Inc.

Lincoln Property

Acore plans to continue Rockpoint’s business plan for the complex, sources tell the Business Journal. The lender aims to preserve and enhance the property through more leasing transactions.

The complex has lost several notable tenants since the pandemic, including coworking firm Industrious, which shuttered a location at 65 Enterprise.

Acore will bring on Lincoln Property Co., which counts around 17 million square feet of rentable real estate in Orange County, to manage and operate The Heights, sources indicate.

The offices include a trio of three-story buildings and two four-story buildings. They’re on about 21 acres and were built between 1998 and 2000, some of the oldest buildings at the built-out Summit Office Campus.

Seller’s Only OC Property

The Heights was Rockpoint’s only reported office investment in OC, though it’s invested in other real estate ventures in the area.

Today the firm has $15 billion in net assets under management and counts nearly 500 investments across the U.S. Its properties, which include office, residential and hospitality projects, span from Southern California to the New York Metro area.

Rockpoint’s last reported office sale was June 2022, when the firm parted with 1221 Brickell, a 656,821-square-foot office tower in Miami, for $286.5 million. The deal worked out to about $436 per square foot for the 26-story building.

That transaction marked a bright spot in an era of distress for the office market, since buildings and complexes have been selling below their pre-pandemic valuations due to increasing hybrid and remote work models.

Pendry Lender

The Heights’ new owner, Acore, counts several investments in Southern California, including one prominent hospitality property in Newport Beach.

The firm last year provided a $146 million loan for Newport Beach-based Eagle Four Partners’ acquisition of the recently debuted 295-room Pendry in Eagle Four’s home city.

Pendry Newport Beach, located at 690 Newport Center Drive, is OC’s 39th-largest hotel by room count and sixth-largest hotel in Newport Beach.

The 14-story building, formerly Fashion Island Hotel, has had several rebrands since its completion in 1986.

Irvine Co., which owned the property before Eagle Four acquired it, previously shuttered the hotel during the pandemic.

Falling Values

The Aliso Viejo transaction is another sign of declining values for offices in Orange County.
Huntington Beach’s One Pacific Plaza last month sold to local business exec Joe Wen for $42 million, which is a far cry from the property’s prior 2018 sale of $124.5 million.

The 394,000-square-foot office campus’ latest deal, a lender-assisted transaction, works out to about $107 per square foot, while its prior transaction cost ran about $315 per square foot.

The pandemic’s lasting impact on in-person work has driven down the prices of office complexes nationally and locally.

Costa Mesa’s Canvas office campus sold in July for $92.5 million, among the largest office sales in the county in the past two years but still below its pre-pandemic valuations.

Chicago-based EQ Office acquired the campus in two separate deals totaling $102.8 million in 2013 and 2015; it then invested nearly $30 million in improvements to overhaul the traditional offices into a creative office hub.

When considering the total $132.8 million that EQ invested in the asset, the recent sale marks a 30% price tag discount for the new owner, Ontario-based MGR Real Estate.

The Michelson office tower in Irvine, a 19-story trophy property at 3161 Michelson Drive, about a mile from John Wayne Airport, was once valued as much as $345 million.

As of June, that estimated valuation has been cut nearly 26% to $256 million, according to recent investor filings from the building’s owner, Manulife US REIT.

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.

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