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Thursday, Jun 30, 2022

Rare Newport Center Office Buy in Works?

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A big-dollar sale is rumored to be in the works for the Newport Center office complex that holds the headquarters of bond fund manager Pacific Investment Management Co. and others.

Pacific Financial Plaza, a three-building complex in Newport Beach’s upscale office market next to Fashion Island, is said to be near a sale, according to real estate sources.

The buzz surrounding the rumored deal involves the potential buyer as well as a possible record-breaking price for the 280,000-square-foot complex.

Irvine Company, which has its headquarters in Newport Center, is said to be the likely buyer for the complex, according to multiple sources not directly involved in the deal.

A sale, if completed, could run close to $125 million if not higher.

Market watchers said they wouldn’t be surprised to see a price of $400 to a record $500 per square foot for the buildings, given Pacific Financial Plaza’s location, high occupancy and big-name tenants.

The complex, which includes two seven-story office buildings and a third, smaller building with retail tenants, was 98% full as of earlier this year, according to regulatory filings.

Pimco, part of Germany’s Allianz SE, leases about 180,000 square feet at Pacific Financial Plaza. Its lease runs about another four years.

Irell & Manella LLP, one of the larger law firms operating here, leases about 56,000 square feet of space at the complex. It re-upped its lease last year for seven years.

Tenants at the building told the Business Journal they’ve heard rumors that Irvine Co. is looking to buy the complex but that nothing has been announced.

Officials with Irvine Co., the largest office landlord in Newport Center and all Orange County, could not be reached for comment.

It wouldn’t be the first time the Irvine Co. has made an effort to buy the property, according to sources.

The buildings are owned by the California State Teachers’ Retirement System and managed by Thomas Properties Group Inc. of Los Angeles.

Along with a nearby building that holds the headquarters of Pacific Life Insurance Co., Pacific Financial Plaza is one of the most prominent Newport Center complexes not owned by Irvine Co., which has a dozen other properties in the area.

Monthly rents at Irvine Co. buildings in the area run as high as $4.40 per square foot, according to the company’s website.

Recent Deals

Irvine Co. has made some recent buys, fueling speculation about a potential Pacific Financial Plaza deal.

In October, Irvine Co. bought the Archstone Gateway apartment complex in Orange, its first major acquisition in several years.

The 884-unit complex, built a few years ago in the Platinum Triangle area around Angel Stadium of Anaheim, is believed to have traded hands for more than $230 million.

The company’s also said to be nearing a deal to buy Costa Mesa’s Pacific Arts Plaza, home to law firm Rutan & Tucker LLP and others.

A deal to buy the eight-building complex next to the San Diego (I-405) Freeway on Anton Boulevard is “imminent,” according to sources familiar with the deal.

Pacific Arts Plaza is expected to sell in the $200 million or higher range.

Pacific Financial Plaza is expected to sell for less but the price likely will be higher on a per-square-foot basis than the Costa Mesa complex, which totals about 787,000 square feet of office and retail space.

At an estimated $450 per square foot price, Pacific Financial Plaza would be valued at about $125 million.

If a sale goes through near that price, it would be the most expensive office sale per square foot here in recent memory.

Larger and midsize offices in other parts of Newport Beach haven’t traded near the $400 per square foot mark in nearly three years.

It’s been at least a decade since another large office came on the market in Newport Center, according to brokers.

“Institutional capital loves core product right now, and Newport Center is as core as it gets,” said Kevin Shannon, vice chairman for Los Angeles-based CB Richard Ellis Group Inc. and one of the region’s top brokers for office sales.

Big real estate investors increasingly have been going after local office deals, according to Shannon.

Near John Wayne Airport in Irvine, there were close to 18 offers made for the 2600 Michelson tower, with CB Richard Ellis expected to close a sale shortly, Shannon said.

Most offers were from pension funds, real estate investment trusts and other deep-pocket buyers. That has pushed a likely sales price for 2600 Michelson above what might have been expected a few months ago, he said.

The recently built 2211 Michelson office in Irvine sold for $380 per square foot in June, which to date is the priciest office sale seen so far this year on a per-square-foot basis.

Other deals for less prestigious buildings with high vacancy rates have sold closer to $200 per square foot.

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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