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Sunday, May 28, 2023

Kingsbarn, Barker Pacific Pay $82M for Griffin Towers

Griffin Towers, a two-tower office complex in the South Coast Metro area of Santa Ana, has traded hands at a steep discount from its pre-pandemic valuation.

Griffin Towers, a two-tower office complex in the South Coast Metro area of Santa Ana, has traded hands at a steep discount from its pre-pandemic valuation.
The 560,000-square-foot project—part of the 46-acre Hutton Centre mixed-use complex at the corner of MacArthur Boulevard and the Costa Mesa (55) Freeway—sold for $82 million, or roughly $141 per square foot, according to property records.
That represents a nearly 57% price drop from its last sale to EQ Office, a unit of New York-based private equity giant Blackstone, in 2014.
Prior to the onset of the pandemic in 2020 and subsequent market headwinds that continue to rattle the office sector, Griffin Towers would have garnered a price tag topping $150 million, sources indicate.
The towers were sold to a venture between Barker Pacific Group (BPG) and Kingsbarn Realty Capital LLC, real estate investors who’ve bought other Orange County offices the past few years.
The twin 13-story offices at Griffin Towers are roughly 70% occupied, according to Paul Jones of Newmark, which brokered the deal on behalf of the seller.
“Kingsbarn and Barker acquired the project on an attractive basis and a discount to the replacement cost,” Jones said. He worked on the deal with colleagues Kevin Shannon and Brandon White, while Newmark’s David Milestone and Henry Cassiday arranged a loan on behalf of Kingsbarn and BPG.

Recent Deal
Major tenants at Griffin Towers include UKG, Michael Baker International, Psomas, Nation’s Direct Mortgage and HNTB.
Blackstone had been looking to sell the project for roughly three years, sources tell the Business Journal.
The New York City private equity giant has invested a significant amount in the project in recent years, upgrading common spaces and adding amenities. The buildings were first built in 1987 and represent one of six total office projects at Hutton Centre, which also includes restaurants, the 349-unit Skyline residential tower complex, and two hotels.
The sale of Griffin Towers comes less than two months after 4 Hutton Centre, a 217,000-square-foot office tower at the complex, sold for $25 million, less than half its last sales price in 2019.
Joe Wen, the founder of multinational conglomerate Formosa Ltd. and an OC resident, paid about $115 per square foot for the 10-story office in a value-add play.

Hutton Centre Listings
Another tower at the complex—3 Hutton Centre—is also on the market, with Cushman & Wakefield representing the seller, Cypress Office Properties, which paid $50.5 million, or nearly $253 per square foot, for the building in 2016. The 199,834-square-foot office is seeking a price of $39.9 million, or around $200 per square foot, sources indicate, which would mark a 27% price drop.
Newmark last week started taking offers for 200 and 201 E Sandpointe Ave., a pair of eight-story offices totaling about 317,000 square feet elsewhere in the complex. That project last sold in 2016 for $52.7 million when it was roughly 82% occupied.

New Owner
For Las Vegas-based Kingsbarn, the Griffin Towers deal is the latest Orange County investment for the commercial investor, which has made its mark on the local office market with a series of deals totaling more than $250 million in the past two years.
“This is the sixth project I’ve worked with Kingsbarn on in Orange County in recent years,” Jones said. “They’re one of the most active suburban office buyers on the West Coast.”
It most recently paid nearly $63.8 million for HERE, a five-building, 223,974-square-foot office hub in Laguna Hills. It partnered with Irvine-based commercial investor Kelemen Co. on the deal.
Near the start of 2022, Kingsbarn and BPG partnered to buy one of Fullerton’s largest multi-tenant office complexes, Fullerton Towers, for $45.5 million or roughly $200 per square foot.
CBRE will handle leasing at Griffin Towers on behalf of Kingsbarn and BPG.
Los Angeles-based BPG now has a portfolio of eight offices totaling more than 3 million square feet.
“The property offers a great location to the major freeways, John Wayne Airport, and a neighborhood of diverse amenities,” Michael Barker, principal and managing director of BPG, said of Griffin Towers.

Distressed Sales
The largest headwind plaguing the office market the past three years after the onset of the pandemic, in particular high-rises, is getting people back in the office, Jones said.
Some Orange County office buyers are waiting for even steeper discounts amidst those lower occupancy rates, and as maturity dates loom for debt deals across OC offices.
“There is a lot of debt maturing here in the next six to nine months, which will create a lot of opportunities for those in a liquid position to make deals,” Jones said.
It also raises the possibility of landlords giving back the keys to distressed projects.
“We haven’t seen a high-profile deal yet in which owners give the key, but some may be close to happening,” Jones said.
Office buyers are also scouting office plays for multifamily conversions, Jones added. His firm has two other OC office deals under contract with apartment operators.

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