The shadow of the commercial real estate crash in 2007 and 2008 lingers over Orange County’s market for high-profile office sales.
Some $300 million worth of office sales listed in this Top Real Estate Deals special report were said to be in some form of financial distress when they changed hands last year in a variety of lender-driven and bank-approved transactions.
Another $190 million or so of last year’s sales involved sales of buildings that were bought out of distress in 2009 or later and flipped by their new owners for healthy profits.
A listing of OC’s top office sales of 2011 starts on page 28.
High-Water Mark
More than 75% of the $634 million in office sales featured in this special report can point to the commercial real estate downturn for their impetus.
That’s the highest percentage seen in OC’s listing of the 10 largest office sales since the onset of the downturn, though on a dollar basis other years had a greater mass of distressed sales.
In 2010 about $575 million of the $844 million, or about 68% of local office sales listed in the Top Deals section, were believed to be lender-driven transactions.
In 2009 about $355 million of the roughly $500 million in large OC office sales, or about 71%, qualified as distressed deals.
For 2008 roughly $260 million of the $640 million, or 40% of OC’s top office deals, were sales that involved some form of financial distress.
Meantime, an end to the situation isn’t necessarily in sight, according to market watchers.
A recent report by Alex-andria, Va.-based Delta As-sociates lists the combined OC and Los Angeles regions as the most troubled market of any it covers.
The volume of distressed commercial real estate in OC and L.A. rose from $8 billion in early 2010 to $13.7 billion by June and stood at $12.2 billion in January, according to Delta Asso-ciates’ Distressed Commer-cial Real Estate Journal. The office segment contributed 47%, or $5.7 billion, of the OC-L.A. total.
Big Flip
The largest office sale of 2011 offers a primer on the ups and downs of OC’s office market the past few years.
The 2050 Main Street office in Irvine, which opened in mid-2007, sold in late 2009 for about $56 million, making it the third-largest office sale of that year. The building was acquired for a sum well below construction costs from the lenders of Phoenix-based developer Opus West Corp., which went bankrupt in 2009.
The building was about 30% full at the time of the 2009 sale.
The property was eventually leased up over 80%, and Newport Beach-based real estate investor Greenlaw Partners and backers Westbrook Partners LLC of New York and Walton Street Capital LLC of Chicago resold the office to an affiliate of Boston-based institutional investor AEW Global late last year.
AEW paid about $108.5 million for the 13-story building in the Irvine Concourse office campus near John Wayne Airport, making it the only individual Irvine office to sell at a price topping $100 million since mid-2010.
The Business Journal’s listings in the Top Deals section don’t include portfolio sales of separate properties. If it did, a $175 million foreclosure-related sale of five office complexes in Irvine, Newport Beach and Seal Beach to affiliates of New York-based insurer American International Group Inc. early last year would have topped the office-sale list.
On the Horizon
At least two more distressed office towers in central OC should see a sale later this year.
The 261,000-square-foot Stadium Towers Plaza on East Katella Avenue in Anaheim and 282,000-square-foot 500 Orange Tower on State College Boulevard in Orange are in receivership and have been marketed for sale since last year.
The properties were previously run by Los Angeles-based MPG Office Trust Inc., and had a combined $210 million of debt tied to them at the time of their 2007 purchases.
The receivers for the two office towers need to sell Stadium Towers by June, and 500 Orange Tower by September; otherwise the lenders are obligated to acquire the properties either by foreclosure or deeds-in-lieu of foreclosure, MPG Chief Executive David Weinsein said earlier this month during a call with analysts.
