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AIG Gets 11-Building Portfolio on Foreclosures

Affiliates of New York-based insurer American International Group Inc. have taken over 11 buildings of midsize offices in Newport Beach, Irvine and Seal Beach with an eye on being a long-term owner.

The company took over the offices earlier this year through a series of foreclosure auctions.

AIG paid a combined $175 million through credit bids for the buildings, which comprise five complexes and about 812,000 square feet.

That price was about 70% of the properties’ combined debt, according to Orange County Superior Court records.

The largest complex sold for $65 million. The combined portfolio purchase price amounts to the most expensive office sale seen in Orange County so far this year.

AIG affiliates recently hired property management and leasing teams for the buildings, which include four complexes near John Wayne Airport and another in Seal Beach.

The local office of Dallas-based Lincoln Property Co. is acting as asset manager and property manager for the buildings.

Brokers with the Irvine office of Cushman & Wakefield Inc. are heading up leasing.

The plan is for AIG to run the buildings for the foreseeable future, said James Estrada, a broker with Cushman & Wakefield.

• THE NEWS:

Affiliates of AIG pay $175 million for 11 buildings in Newport Beach, Irvine and Seal Beach

• BACKGROUND:

Sale at about 70 cents on the dollar through foreclosure touched off when PNC Realty Investors Inc. defaulted on loans last year

• WHAT’S AHEAD:

AIG plans to hold buildings for now, hired property manager and tapped Irvine office of Cushman & Wakefield for leasing

“There’s no plan to sell anything—they expect to continue to manage the assets,” Estrada said.

Lincoln Property also is a real estate owner in its own right, with Santa Ana’s Griffin Towers office complex as its most prominent local property.

Officials with the company’s local office said they’d be interested in buying the buildings from AIG at some point and are happy to be helping the insurer run the portfolio for now.

“We love the property, it’s something we’d like to own,” said Kevin Hayes, senior vice president for the Southern California office of Lincoln Property.

Post Bailout

AIG was bailed out by the government in 2008 in the midst of the financial crisis.

The company is believed to have investments in several other local buildings, through debt and equity investments. Details of its local real estate portfolio aren’t known.

The buildings’ prior owners, a venture of Irvine’s Bixby Land Co. and Mercantile Real Estate Advisors Inc., a pension fund adviser that now operates as PNC Realty Investors Inc., defaulted on their loans last year.

The buildings were placed into receivership in October.

AIG affiliates were the primary lenders for the PNC-Bixby portfolio, giving them first crack at buying the buildings through foreclosure auctions.

The buildings, which were acquired for a reported $345 million in 2007, had a combined $255.1 million of debt tied to them at the time of the foreclosure sales, according to court records.

Prior to the PNC-Bixby ownership group, the buildings had been owned in turn during the course of a year by Los Angeles-based Maguire Properties Inc., now known as MPG Office Trust, New York-based private equity firm Blackstone Group LP and Chicago’s Equity Office Properties Trust.

PNC Realty made the decision to default on the offices last year, according to real estate sources.

Bixby, which held a minority stake in the properties, is said to have been working to restructure the loans with lenders until PNC moved to default.

The AIG affiliates buying the buildings were Western National Life Insurance Co. and the Variable Annuity Life Insurance Co., according to court records.

Pricing for the individual office sales ranged from a low of $184 per square foot to a high of $228 per square foot, according to court documents. Court records didn’t disclose any other bidders.

In Seal Beach, the three-building Bixby Office Park was the priciest complex to trade hands. The 286,287-square-foot complex had just under $91 million of debt tied to it at the time of the trustee sale.

Western National ended up bidding $65 million, or about $227 per square foot, for the Seal Beach buildings.

Newport Buildings

In Newport Beach, a six-story, 82,000-square-foot building at 1201 Dove St., sold for $18 million, or about $220 per square foot. There was $24.3 million of debt tied to the building at the time of the trustee sale.

Also in Newport Beach, Redstone Plaza—a two-building complex near MacArthur Boulevard and Dove Street totaling 175,817 square feet—sold for $40 million, or about $228 per square foot.

Redstone Plaza had $56 million in debt tied to it at the time of its sale.

At Irvine’s nearby Fairchild Corporate Center, a two-building complex also known as Newport Summit also sold. The 110,406-square-foot property had $33.2 million of debt at the time of the sale and ended up trading hands for $23 million, or about $208 per square foot.

Also in Irvine, Western National bid $29 million, or about $184 per square foot, for Inwood Park, a three-building,157,480-square-foot complex on Red Hill Avenue. The property had $50.5 million of debt tied to it.

AIG is expected to make some upgrades to the individual offices, according to Lincoln Properties’ Hayes.

“They’ll spend the money,” he said.

Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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