Irvine-based CapRock Partners LLC has snapped up an office just off the Costa Mesa (55) Freeway for its latest local creative-office project.
The privately held commercial real estate investment firm recently closed on the purchase of 1063 McGaw Ave., a 55,474-square-foot office that has served as the headquarters of Spectrum Group International Inc. for the past four years.
The two-story, steel-framed building in Irvine, across the freeway from the campus of Santa Ana-based title insurer First American Financial Corp., sold for about $9.6 million, or about $173 per square foot, according to CoStar Group Inc. data.
CapRock got an $8.6 million loan from the Corona del Mar branch of Farmers & Merchants Bank of Long Beach to finance the deal.
It’s the company’s fourth Orange County acquisition in the past five quarters. Those four deals—which also include properties in Anaheim, Placentia, and Tustin—total nearly $70 million, according to Jon Pharris, a principal at CapRock and the company’s director of acquisitions.
Big Renovation
The new owner is planning a major renovation of its most recent acquisition in a bid to appeal to tenants looking for creative-office space in the area around John Wayne Airport.
“We plan to leverage our development expertise to add value and realize a significant upside,” said Pat Daniels, CapRock’s cofounder and chief operating officer.
The renovations should be completed by next year, according to the company.
CapRock is actively on the lookout for other potential creative-office redevelopment deals in the Irvine Business Complex area, as well as in Huntington Beach and South County, Pharris said.
As the office and R&D market in Orange County enters this new stage of its recovery, “we are seeing a heightened demand for progressive office space, which is in short supply” in those regions, Pharris said.
An affiliate of Spectrum Group International, long one of Orange County’s largest publicly traded companies by sales until retrenching its local operations last year, was the seller. It had paid about $7.3 million for the building in 2011, according to brokerage data.
Spectrum Group, a trader of precious metal products and an auctioneer of coins and wine, last year spun off its most valuable business, its precious metals trading operations, into a new company called A-Mark Precious Metals Inc.
A-Mark is based in Santa Monica and has a market value of about $70 million.
Spectrum delisted its own shares after the spinoff and has downsized its local operations. Spectrum Group is still operating in the McGaw building under a short-term lease that runs until the third quarter, according to Pharris.
The new owners are only looking to lease out the bottom floor of the McGaw Avenue building following Spectrum Group’s departure and the redevelopment of the property.
BigRentz.com, a construction equipment rental company that moved its headquarters to the building in 2013, now leases the entire top floor.
The company a few years ago leased less than 5,000 square feet of space in Santa Ana.
That lease expansion mirrors the growth seen by BigRentz of late.
BigRentz was Orange County’s fastest-growing private company last year, with a two-year revenue growth of more than 1,200%, according to Business Journal data.
It earned about $6.7 million for the 12-month period ended in June 2014, up from less than $500,000 in the same period in 2012.
The company was on track to close 2014 with $15 million in sales, BigRentz officials told the Business Journal in September.
BigRentz leases heavy equipment, such as excavators, backhoes and scissor lifts, to customers ranging from weekend warriors to large contractors. It has secured contracts with about 900 suppliers, which deliver equipment from 6,000 locations nationally.
Scott Read, executive managing director with the Newport Beach office of Newmark Knight Grubb Frank, brokered the sale of the McGaw Avenue building and is handling leasing for the remainder of the building.
CapRock’s leasing and redevelopment strategy for the Irvine property is similar to what is being seen at a Tustin industrial building near Santa Ana (I-5) Freeway that it bought last year.
Peregrine
That 110,000-square-foot building had been vacant, but CapRock brought on Peregrine Pharmaceuticals Inc. as a tenant for 40,000 square feet of space at the time of its purchase.
Peregrine is headquartered next door to the Myford Road building. The company said last December that it was leasing the extra space to handle increased demand for its contract manufacturing subsidiary, Avid Bioservices Inc.
CapRock is planning a creative-office redo for the remaining 70,000 square feet at the Tustin building on Myford. Plans for that project are making their way through the city now, according to Pharris. The company hopes to start construction later this year.
