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Raytheon’s Fullerton Campus Sells for $77M

The 34-acre Raytheon campus in Fullerton has traded hands for nearly $77 million, in a deal that could ultimately result in a sizeable commercial or residential redevelopment for one of the larger office campuses in North Orange County.

A venture between Hines and Oaktree Capital Management LP sold the property—which includes two large office buildings totaling more than 405,100 square feet and several smaller industrial and research buildings—that has been entirely occupied by the Arlington, Va.-based defense contractor for nearly three decades.

Records indicate the buyer is Prime Enterprises LLC, an affiliate of San Gabriel-based Diamond Development Group, which counts other area properties including the Diamond Jamboree shopping center in Irvine.

Raytheon is expected to remain in the facility through 2042, sources indicate, at which point the new owner may redevelop the site into different uses, such as education or housing.

The recent sale marks a nearly 113% premium over Hines’ reported investment in the site.
Hines had been considering a redevelopment of its own for the property, but those plans never moved forward.

“This was a great opportunity to acquire a rare office campus in Orange County with an existing Fortune 500, investment grade tenant, with attractive redevelopment options in the long term,” Jeff Cole, executive vice chairman for the capital markets team of Cushman & Wakefield, told the Business Journal.

Cole and Nico Napolitano from Cushman & Wakefield represented Hines in the deal; the buyer’s agent was undisclosed.

Long-Term Tenant

Hines in 2012 bought the buildings for a reported $18 million, then paid an additional $18 million in 2016 to buy the ground lease for the property, bringing its total investment to $36 million.

The investor, which has made several sizeable investments in North OC over the past decade, had once eyed redeveloping the site into different uses, but was unable to buy out Ratheon’s lease, sources indicate.

The Raytheon campus was built in 1986 at 1801 Hughes Drive, located about a mile north of the Riverside (91) freeway.

The site is nestled in the corner of what formerly was a larger complex used by Hughes Aircraft Co.; Raytheon has had operations in Fullerton since acquiring Hughes Aircraft in 1997.

The firm is Orange County’s second-largest aerospace and defense contractor, with an estimated 2,000 local employees.

Retail Focus

Upon Raytheon’s lease expiration in 2042, the buyer may demolish the campus to make way for different commercial uses, such as universities, to keep up with growing demand from local schools, or single-family housing, sources note.

The site is currently zoned for industrial. It backs up against Sunny Hills High School and Fullerton Chinese School, and is largely surrounded by residential uses. It’s about 5 miles west of California State University, Fullerton’s main campus.

Diamond Development is headed by Alethea Hsu, a doctor by trade who now owns several retail centers in OC and Los Angeles with an Asian focus.

The Diamond Jamboree shopping center, an H Mart-anchored mall along Alton Parkway, is among the company’s most notable retail holdings, and is one of the busiest Pan-Asian shopping centers in the county.

The 114,000-square-foot mall is the third in the Diamond Development portfolio.

The Fullerton deal is the largest reported buy for Hsu.

A housing or education-focused redevelopment would mark a shift of sorts for the commercial real estate firm, whose last reported area investment was in 2017, when it paid $12.4 million for land underneath the Newport Beach Tennis Club.

Office Conversion

Office campuses have been a source for new industrial developments in recent years, with investors favoring the logistics sector in the wake of pandemic-induced work-from-home trends.

Hines and Oaktree in 2021 sold off the 12.5-acre Volt Campus in Orange to Rexford Industrial Realty Inc. (NYSE: REXR) for $70 million; Rexford is in the process of redeveloping the office campus into an industrial hub.

Hines is moving ahead on plans for a separate redevelopment project elsewhere in the county on behalf of South Coast Plaza; it recently submitted plans alongside the Segerstrom family to redevelop the South Coast Plaza Village shopping center into The Village Santa Ana, a mixed-use project that proposes homes, office and retail.

The Raytheon sale is the largest office transaction for Hines since it sold the Intersect office campus in June 2022 for $235.3 million; that sale is tops for the OC office market since 2021.

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