Hines Interests LP has established itself as one of the largest commercial property owners in North Orange County following the purchase of a six-building office campus in Brea.
The Houston-based real estate investor and developer late last month closed on the purchase of Brea Place, a collection of buildings on South State College Boulevard just north of the Brea Mall.
The purchase totals close to 560,000 square feet of office space just off the Orange (57) Freeway, and it also includes roughly 10 acres of land slated for mixed-use development, most likely apartments.
Terms of the deal were not disclosed; the six buildings were valued at close to $115 million prior to the recent recession. It’s believed that the latest deal is for less than that amount.
Hines bought the property in a partnership with Los Angeles-based private equity firm Oaktree Capital Management LP.
The two companies have partnered on 2.2 million square feet of office purchases in OC over the past few years, including deals for the Savi Tech Center in Yorba Linda and the Fullerton campus of defense contractor Raytheon Co.
Including deals done on its own and with other investors, Hines’ office portfolio in Orange County now totals nearly 3 million square feet, with a little more than 1.3 million square feet of that in North OC.
The company is now one of the two largest owners of higher-end offices in North OC, along with Newport Beach-based Olen Properties.
North OC “is a highly attractive submarket where Hines and Oaktree expect to grow our portfolio,” said Hines Managing Director Ray Lawler, who leads the company’s development and investment office in Irvine.
“The accessibility to the Orange County, Inland Empire and Los Angeles labor pools, coupled with strong demographics, make Brea a great opportunity for investment,” he said.
Former MPG Offices
The latest investment involves the purchase of two office parks—Brea Corporate Place and Brea Financial Commons—that are across the street from each other on South State College Boulevard.
The buildings range from one to six stories, and, under the new owners, both sites are being rebranded with the Brea Place name.
Five of the six offices were previously owned by Los Angeles-based MPG Office Trust Inc., which turned the properties over to lenders in 2012 after falling behind on about $109 million in debt.
Hines and Oaktree bought those buildings from an affiliate of Stamford, Conn.-based RBS Global Securities, according to property records.
The sixth building, a nearly 43,000-square-foot office at 130 S. State College Blvd. that’s fully leased to Capital Source Bank, was bought from Encinitas-based Providence Capital Group, which bought the office from MPG Office in 2009 for a reported $6.5 million.
Upgrades
The entire campus was about 75% leased at the time of last month’s sale. The new owners plan to upgrade the campus with new lobbies, landscaping and other features.
A plan also is under way to convert a surface parking lot at the southern edge of the campus, across the street from the Brea Mall, into an apartment development.
A time frame for the development—which appears to be able to hold 300 or more apartments—hasn’t been disclosed.
“We’d like to move ahead on it sooner rather than later,” Lawler said.
Multifamily Development
The land is one of several sites in the vicinity that Hines is exploring for multifamily development.
The developer has been in talks with the city’s school district to buy a nearly 18-acre site at the northwestern edge of the Brea Place campus for a potential mixed-use site. Local reports put the likely purchase price for the land at about $25 million.
About a mile away at the city’s La Floresta masterplanned community that’s under development, Hines is under contract to buy land that would hold a 150-unit apartment complex, according to Brea city documents.
Hines’ growth strategy in Orange County, and in particular North OC’s low- and midrise office sector, runs counter to what the international developer is known for in most of its major markets.
The company’s specialty is building high-end office towers and other properties—it built, for example, the 60-story Chicago skyscraper at 300 N. LaSalle St. that Newport Beach-based developer Irvine Company plans to buy for $850 million.
Its first office development here was the 12-story 2211 Michelson office building in Irvine. That was built in 2007 with Fort Worth, Texas-based Crescent Real Estate Equities Co.
“We’ve had to evolve in this market,” Lawler said. “It’s hard to stay in business here if you’re only focusing on high rises.”
