SANTA ANA — The owners of New American Funding, a Tustin-based mortgage lender that in recent years had been one of Orange County’s fastest-growing private companies, has made its most notable local commercial real estate investment.
An LLC headed by New American’s co-founder, Rick Arvielo, in February paid $31 million for One MacArthur tower, a nine-story office building in Santa Ana’s South Coast Metro area.
The 208,257-square-foot tower, which sits alongside the Costa Mesa (55) Freeway, near the headquarters campus of title insurance giant First American Financial Corp. (NYSE: FAF), traded hands for about $149 per square foot.
The building’s price marks a 43% dip from its sales price in 2019 and is the latest example of a local high-rise office tower selling for a fraction of its pre-pandemic valuation, due to slow return-to-work trends.
Pre-pandemic, higher-end office towers in the area often traded above $300 per square foot.
Occupying 2 Floors
One MacArthur is the largest reported office buy in Orange County for Rick Arvielo and his wife, Patty, who are New American’s co-CEOs. They also own New American’s 44,000-square-foot headquarters facility, and have bought and sold other properties in Tustin and Santa Ana in prior years.
New American Funding plans to occupy at least the seventh and eighth floors of the just-bought tower, Rick Arvielo told the Business Journal.
The building will be the company’s new headquarters and will house some 150 to 300 employees currently working at its properties on Myford Road in Tustin and Red Hill Avenue in Santa Ana.
“The Red Hill property is a C building,” while One MacArthur, built in 2000 and renovated in 2020, is Class A, Arvielo said.
The area around One MacArthur is walkable, with the handful of restaurants in the nearby Hutton Centre a few blocks south, he added.
“I wanted to give my employees a better work environment and this building came on the market at what I consider a favorable price,” Arvielo said. “It just made too much sense.”
One MacArthur was 62% leased at the time of its sale. Its recent sale neared its asking price of $33 million.
The tower’s low occupancy, in combination with stubbornly high interest rates and ongoing troubles in the high-rise office market, all contributed to the building’s $31 million price tag, real estate sources indicate.
Cushman & Wakefield’s Chris Bosley and Raymond Thagard represented New American Funding on the deal. The seller, San Francisco-based alternative asset management firm TPG, was repped by Paul Jones, Michael Moore and Brandon White of Newmark.
Price Discrepancy
New American Funding isn’t the only incoming occupant at One MacArthur.
An entity with the State of California recently signed a long-term lease for space in the building.
That tenant will be neighbors with its fellow state agencies at the tower’s sister building, Two MacArthur Place.
The adjacent nine-story office is largely leased by California agencies, including the Department of Industrial Relations, the Department of Health Care Services and the Employment Development Department. Most have long-term lease deals in place.
The Two MacArthur tower in 2021 was acquired by Boyd Watterson Asset Management, a Cleveland-based investor in commercial properties leased to government agencies.
Boyd Watterson paid $98 million for the Two MacArthur office tower, in a deal that worked out to nearly $446 per square foot, among the highest PSF prices paid for an area office tower the past few years.
The stark difference in valuation for the two similar buildings has a large part to do with the tenant makeup of each tower, and the long-term leases in place for Two MacArthur’s stable government tenants.
TPG Acquisition
Prior to One MacArthur’s latest trade, the seller invested about $3.6 million on a lobby renovation, updates to corridors and restrooms, and modifications to its parking garage.
The building fell into new ownership last year, when TPG closed on its $2.8 billion acquisition of alternative investment manager Angelo Gordon.
Angelo Gordon bought the tower in 2019 for $54 million through a joint venture with real estate investment company Ocean West Capital Partners.
Local Buyer
New American’s Arvielos, whose company reported $935 million in revenue for 2022, are no stranger to buying and selling commercial real estate.
The owners of the mortgage lender most recently sold a high-end manufacturing and office building, dubbed The Radius, along Myford Road in Tustin, not far from New American’s headquarters.
Developer Hines paid $50 million, or roughly $445 per square foot, for the 112,412-square-foot building in 2022. Avid Bioservices Inc., a contract drug manufacturer (Nasdaq: CDMO), currently uses the facility and others in the immediate vicinity for its manufacturing operations, warehouse space and headquarters.
The Arvielos paid $22.5 million for the building at the end of 2017, property records indicate.
The deal at the time marked the biggest commercial property sale in Tustin in over two years, according to data from real estate tracker CoStar Group Inc.
New American Funding has purchased at least eight buildings since 2013, records indicate. Outside of OC, the company has bought properties in Riverside, Temecula, Las Vegas and Texas.
