The purchase of four offices in San Diego has capped off nearly $100 million in buys and investments in California properties for Irvine-based Bixby Land Co. over the past quarter.
Bixby recently completed the purchase of a single-building office in San Diego’s Kearney Mesa submarket and a three-building complex in the Sorrento Mesa area.
The four buildings, which total about 135,000 square feet, were sold by different investors for a combined $21.8 million, or about $161 per square foot.
Bixby plans to spend an additional $16.5 million to turn the four buildings, one of which was a former office for the FBI but is now vacant, into creative offices.
The commercial real estate developer and investor has recently found a niche of giving older, largely vacant office properties across the state more contemporary layouts and looks, often called creative-office space.
Plans for the San Diego offices include a variety of design features that promote an indoor/outdoor work environment and open and collaborative space.
It’s the company’s first stab at creative-office redevelopment in San Diego. Bixby has done a number of creative-office projects in Silicon Valley over the past few years and more recently has taken on similar projects in Los Angeles, as well as Orange County.
“We’re continuing the same strategy, but now we’re moving down the state,” said Bixby Chief Executive Bill Halford.
Bixby said it has spent nearly $400 million buying older offices and redeveloping them over the past three years. Several of those buildings, particularly in the red-hot Silicon Valley office market, have since been leased up and sold for healthy profits.
The office markets in Southern California were slower to recover from the recession than in Silicon Valley, but the fundamentals now support the company’s strategy to move south, particularly for tenant-friendly creative-office space, Halford said.
“We learned in Silicon Valley that there are a disproportionate number of firms that want the best product, and we think that expectation is equally prevalent in San Diego,” Halford said.
“Most of the (Southern California) markets are now in a healthy position,” Halford said. “We’re in a cycle where landlords can be in more of a leadership position (in terms of rents).”
“The question is how long it will last,” said Halford, who led the office division of Newport Beach-based Irvine Company until joining Bixby in 2006.
Bixby’s first creative-office project in Irvine, a 45,000-square-foot building near the intersection of the San Diego (405) and Costa Mesa (55) freeways, is nearing completion.
The company is in final negotiations with a prospective tenant to lease the bulk of the building, Halford said.
Redevelopment of second local project—near John Wayne Airport in Newport Beach—is expected to wrap up work in about six months, according to Halford.
Bixby remains an active buyer of industrial buildings, which unlike the value-add office investments tend to be nearly full when bought. It recently paid $26.8 million for a pair of buildings totaling about 316,200 square feet in Rancho Cucamonga in the Inland Empire.
The two contiguous buildings, on about 14 acres, are leased to GiTi Tire USA Ltd., which uses the buildings for storage and distribution of automobile and truck tires.
Bixby bought the buildings from Aliso Viejo-based CT Realty Investors, which acquired one of them in 2012 and the other in 2013.
Bixby has also pushed into the Central Valley’s industrial market. Another local company, Irvine-based LBA Realty, recently sold it a distribution center in the San Joaquin County city of Tracy.
Bixby paid LBA $31 million for the 517,500-square-foot building, which serves as a distribution center for Orchard Supply Hardware. The retailer is said to have a lease that runs into 2031 for the building, which is Bixby’s first investment in Tracy.
LBA bought the property for $18 million three years ago, according to local reports.
Bixby has an industrial portfolio running more than 5 million square feet overall. Those buildings are said to be more than 95% full.
