The Irvine Spectrum office that holds the headquarters of restaurant operator Yard House USA Inc. is up for sale, according to real estate sources.
A deal for the 210,000-square-foot-building at 7700 Irvine Center Drive is expected in a matter of weeks, according to sources familiar with the deal.
A deal would be one of the larger office sales in the Spectrum in the past few years. A conservative valuation of the nine-story building would put the sale price at close to $60 million. The deal is said to include the assumption of a loan.
The building, near the Santa Ana (I-5) Freeway, is owned by Houston-based American Spectrum Realty Inc., which also has an Irvine office. The property is about 72% full, according to data from CoStar Group Inc.
The property once was known as Orange County’s Chrysler building because it houses local operations of Chrysler Group LLC. The automaker once took up more than half of the building but has been retrenching in the past few years and now occupies one floor.
Yard House consolidated its local offices to about 25,000 square feet in the building, which now carries the name of the restaurant chain.
Other tenants include Irvine’s Galardi Group Inc., the holding company that operates hot dog chain Wienerschnitzel, among others.
The property is being marketed for sale by the Newport Beach and Torrance offices of CB Richard Ellis Group Inc. Brokers there declined to comment on a pending sale.
Potential Buyers
Newport Beach-based Irvine Company—which has snapped up to close to a billion dollars worth of commercial properties here and in Chicago in recent months, and already owns a bulk of the offices in the Spectrum—is thought to be one of several potential buyers.
The deal for the building would appear to be rather straightforward, according to sources.
Some real estate watchers are keeping an eye on whether a sale could be affected by recent news that 200,000 square feet of upscale office space will become available in the immediate area.
The Federal Deposit Insurance Corp. said earlier this month that it plans to shutter its Irvine Spectrum office next year, putting the upscale office space back on the market in early 2012.
The FDIC opened the temporary office at Irvine Co.’s recently built 40 Pacifica building in 2009, setting up shop just a few blocks from the 7700 Spectrum office.
The headline-making deal was one of the largest office leases seen in the county in several years.
The lease was for three years, with two one-year options. The options aren’t being exercised, the FDIC said.
The FDIC’s decision reflects improving health in the banking industry, according to the agency, which uses the local offices as a center to manage receiverships and to liquidate assets from failed financial institutions, primarily those based in the western U.S. (see related story, page 6).
The Irvine office, which had room for about 600 employees, is set to close next January, the FDIC said. Some employees have been offered positions at the FDIC’s Texas operations, according to sources.
Spectrum Setback
The move by the FDIC is a setback for the Spectrum office market, which totals about 8 million square feet of space and ended 2010 with a vacancy rate of about 19%, according to Newport Beach’s Voit Real Estate Services.
Brokers not involved in the deal for 7700 Irvine Center Drive said that a typical tenant at the building takes 4,000 square feet or less.
Irvine Co. has been marketing the 40 Pacifica building to larger prospective tenants.
The FDIC’s decision to vacate its space might give a potential buyer for the Irvine Center Drive property some pause. But it’s not likely to shake anyone off because “they’re not trying to get a 50,000-, 100,000- or 150,000- (square-foot) tenant,” said one broker familiar with the deal.
Empty space at the building is being marketed with asking rents of $2.35 per square foot, which is within the range of rents listed for 40 Pacific.
