Orange’s City Tower has traded hands in the county’s largest single-building office sale of the year.
The 20-story building, just north of the Outlets at Orange shopping center, sold for $150.5 million. That works out to a price of roughly $345 per square foot for the building, which runs some 435,000 square feet and is the largest office tower in Central Orange County.
New York-based investment firm Opal Holdings is the tower’s new owner; it’s privately owned Opal’s only asset in Orange County, according to the commercial real estate investor’s website.
KBS Ties
The building last sold in early 2018, when a non-traded real estate trust run by Newport Beach-based KBS Realty Advisors paid just under $150 million for the building at 333 City Blvd.
In 2019, management of the non-traded REIT’s assets were taken over by an affiliate of Los Angeles-based Pacific Oak Capital Advisors, whose exec team counts ties to KBS.
Pacific Oak’s latest annual report said another $8.7 million was put into City Tower subsequent to the 2018 purchase.
The tower was built in 1988, and recently wrapped a $3 million renovation that upgraded the lobby, fitness center, conference center and entryway.
Pacific Oak said late last month that it repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by the property following the sale to Opal.
Opal’s executive team includes Shannon Hill, who was previously senior vice president of acquisitions, dispositions, and asset management for KBS Realty Advisors.
It’s not known whether Opal has bought any other assets that were previously owned by KBS.
The New York investor this year has also bought the tallest office tower in Fort Worth, Texas for $137 million, and a multi-building office campus in New Jersey for $254 million, according to reports.
Private Capital Push
City Tower was about 90% leased at the time of sale. Tenants include UCI Medical Center, which occupies more than one-third of the building.
The office is next to the UCI Medical Center complex, which includes the 418-bed UCI Health Douglas Hospital. Late last year, the University of California bought an eight-story office directly north of City Tower, to expand its office space in the area. It paid $45 million for the 3800 W. Chapman Ave. office.
Other tenants at City Tower include Enterprise Rent-A-Car, Sedgwick and Spaces.
Newmark’s Kevin Shannon, Paul Jones, Brunson Howard, Ken White and Brandon White represented the seller.
City Tower’s strong tenancy, coupled with “below market in-place rents, provides the buyer with a secure, income producing asset with limited future capital improvements,” Newmark’s Jones said in a statement.
The deal marks “another example of a family office with a long-term hold strategy buying a high-quality Orange County office asset,” Shannon added.
“We have seen private capital like Opal more aggressively price office assets compared to institutional buyers in Orange County recently.”
Opal, formed in 2012 by Chairman and CEO Shaya Prager, said its portfolio now tops $1 billion.
City Tower is the second notable sale of late involving a tower next to the Outlets at Orange shopping center, and New York buyers.
Last month, the Business Journal was first to report on the sale of the DoubleTree by Hilton Hotel Anaheim, the 19-story, 461-room hotel across the street from the office tower.
AWH Partners LLC and Apollo Global Management Inc., both of New York, bought the property in a deal that involved the assumption of debt, as well as a $51.4 million cash payment.
Office Growth
The Central OC office submarket has seen a 24% jump in office rent growth over the past decade, according to Newmark research.
It’s OC’s third-largest submarket with about 16.5 million square feet of office inventory. Vacancy in Central OC runs about 13%, in line with OC’s office market as a whole, according to brokerage data.
Newmark notes that a significant portion of Orange County’s current vacancy stems from leased new construction in and around Irvine that tenants have yet to occupy.
According to Newmark, “elevated vacancy levels will decrease in time, and deal activity will likely ramp up in the second half of the year, along with absorptions gains.”
