Orange County’s office market could see a busy stretch of investment-driven sales through year’s end if a handful of anticipated big deals get done.
Almost 1.7 million square feet of high-profile office complexes are up for sale, with a few deals expected to close soon. The properties include high-quality buildings bought by opportunistic investors at relatively low sales prices during the last downturn, as well as a couple debt-strapped properties with lender-driven sales.
Kurt Strasmann, senior managing director for the OC operations of CBRE Group Inc., said many of the proposed sales are “straight down the fairway” propositions, offering buildings with good locations, strong occupancy rates and attractive tenants. That should help pricing, though investors have been spooked of late by the lingering U.S. economic malaise and financial uncertainties in Europe.
“There have been some (properties) that tested the waters and didn’t meet pricing,” Strasmann noted.
The next office tower to change hands could be Irvine’s 2050 Main Street building, a 13-story building opened in Irvine Concourse near John Wayne Airport in 2007. A sale of the building is expected to close as soon as the end of the month, industry sources said.
An affiliate of Boston-based institutional investor AEW Global is said to be the most likely buyer of the property. Newport Beach-based real estate investor Greenlaw Partners and backers Westbrook Partners LLC of New York and Walton Street Capital LLC of Chicago paid $56 million for the building in 2009.
The building was acquired for a sum well below construction costs from the lenders of developer Phoenix-based Opus West Corp., which went bankrupt in 2009. The 314,000-square-foot building was about 30% full at the time of the sale.
Occupancy Up
The building now is 80% leased, according to the CoStar Group Inc. data service.
Tustin-based Sunwest Bank, whose name tops the tower, is among some recently-signed new high-profile tenants. Sunwest signed a 35,000-square-foot lease at 2050 Main Street this year and moved most of its operations and executives to the building, while keeping its headquarters in Tustin.
Market watchers expect the office to fetch $110 million or more. That works out to almost $350 per square foot, or nearly twice what Greenlaw and its backers paid.
Griffin Towers
Elsewhere, the 550,000- square-foot Griffin Towers at 5 and 6 Hutton Centre Drive has reportedly been on the market for about two months. Dallas-based Lincoln Property Co. and New York-based private equity firm Angelo Gordon & Co. paid $90 million, or $164 per square foot, for the twin 14-story towers in March 2010.
The sales price represented less than half of the debt that was held on the property, which had been re-financed for $200 million in 2007 by Los Angeles-based Maguire Properties Inc., now MPG Office Trust Inc.
Occupancy rates at Griffin Towers have risen to 85% since last year’s sale, prompting the current owner’s attempt at turning a quick profit. The buildings—situated at the intersection the San Diego (I-405) and Costa Mesa (5) freeways—could attract bids of about $130 million, or $236 per square foot for a capitalization rate of 6.5% according to CoStar data.
Renewals
But tenant-renewal decisions at Griffin Tower could affect whether the complex attracts a buyer and at what price.
Santa Ana-based Corinthian Colleges Inc. uses the offices as its headquarters. The for-profit college operator leases about 200,000 square feet of office space in Santa Ana and is said to be evaluating its space needs, according to area brokers.
Other Griffin tenants include Florida-based Ultimate Software Group Inc. and law firm Haight Brown & Bonesteel LLP.
In Central OC’s office market, there are several buildings thought to be up for sale in the office market around Angel Stadium.
In Anaheim, the 12-story, 261,000 square foot Stadium Towers Plaza is said to be a potential near-term sales candidate, along with 500 Orange Tower, a 282,000 square foot, 14-story building in Orange.
Both buildings have lots of empty office space and last were owned and operated by MPG Office until being placed in into receivership amid the company’s mounting debt issues. Brokerage Eastdill Secured is said to be marking the two properties and hopes to select buyers soon.
With the properties’ complicated loan structures, the timing of any sale for those two buildings is unknown.
Stadium Gateway
Also expected to be going up for sale soon in Central OC is Anaheim’s Stadium Gateway building, a six-story, 274,000-square-foot office at 1900 S. State College Blvd., just west of Angel Stadium.
Charter Hall Office REIT, an Australian property trust, bought an 80% stake in the property in the summer in a deal valuing the building at about $65 million. MPG Office also holds 20% ownership.
The owners recently said they would put the property up for sale soon, with the property currently 73% leased.
