Oaktree Capital Management LLC, a Los Angeles-based private equity firm, is making a new push into Orange County real estate after taking over one of Irvine’s newest office buildings.
A unit of Oaktree’s real estate division recently took ownership of 17885 Von Karman Ave., a five-story office that was built a few years ago on the former Irvine campus of Washington Mutual Inc.
The 151,370-square-foot building is at the corner of Von Karman and Main Street, a few blocks from John Wayne Airport. It was built by Los Angeles-based landlord Maguire Properties Inc.—now known as MPG Office Trust—in 2007.
It’s one of the five buildings at the campus, which now goes by the name of Quintana. The rest of the campus also is expected to change hands soon in a separate transaction, which is being overseen by a special servicer.
The Quintana building that Oaktree now owns was valued at close to $40 million at the time of its construction. It’s believed to have sold for roughly half that.
It’s the latest disposition of an OC building by MPG Office, which at the peak of the market was the area’s second-largest office landlord, after Irvine Company.
MPG Office has a 20% interest in the remainder of the Quintana campus, which went into default last year after payments were stopped on a $106 million mortgage.
For Oaktree and its subsidiaries, which manage close to $75 billion in assets, the acquisition is a return to commercial real estate investments here, said Senior Vice President Mark Jacobs.
The company’s real estate subsidiaries sold off most of their local portfolio from 2006 to 2007. About six months ago, Oaktree started eyeing acquisitions again, Jacobs said.
Its first local deal was to buy the loan tied to 17885 Von Karman.
“We saw the opportunity to acquire a new building at a competitive (price),” Jacobs said.
The 17885 Von Karman building had a $24.5 million construction loan tied to it. MPG Office turned over the keys to the building a few months ago, pursuant to a deed-in-lieu transaction.
Jacobs described the deal with MPG Office as a “cooperative transaction.”
Oaktree officials aren’t disclosing how much it paid to acquire the loan, but it’s believed to have been at a substantial discount to its face value.
The building had a fair value of $23.7 million at the time it was disposed of, according to a filing MPG Office made with the Securities and Exchange Commission.
MPG Office took a $6.8 million write-down on the property around the time it was disposed of. It also recorded a $9.8 million impairment charge on the property in 2009, according to regulatory filings.
Since taking over the building, Oaktree’s real estate division has brought on the local office of Houston-based Hines Interests LP as an operating partner for the building.
Hines will be handling property management duties at the building, according to Ray Lawler, development and investment manager for the Irvine office of the developer and property owner.
The local office of Jones Lang LaSalle recently was awarded the leasing assignment for the Von Karman building, which is about a third full.
Joe Bevan, vice president in the brokerage’s Irvine office, thinks the location will attract tenants.
Recent Lease
The building signed a tenant earlier this year—Pasadena-based engineering and consulting company Tetra Tech Inc.—which is leasing 57,300 square feet at the building.
Monthly rents at the building are listed at $2.25 per square foot, according to CoStar Group Inc.
The Irvine office is the second large investment that Oaktree has made in OC in recent weeks.
Another affiliate of Oaktree appears to be the likely buyer of the assets of Universal Building Products Inc., a Westminster-based maker of concrete and other construction products that recently filed for bankruptcy protection.
Privately held Universal Building, which also operates under the Don De Cristo Concrete Accessories Inc. name, filed for Chapter 11 bankruptcy protection earlier this month, along with four affiliates.
Universal owes lenders more than $40 million. Oaktree bought Universal’s secured debt in July for undisclosed terms. It has pressed for bankruptcy, along with a quick sale of the company’s assets through a court-overseen auction.
The firm has agreed to provide Universal $6 million to operate in the short term.
Oaktree plans to pledge $25 million in debt it’s owed in exchange for the assets of the company in what’s known as a credit bid.
The firm also is a stalking horse bidder at the auction, planned for next month.
