About a month after selling the Airspace creative office in Tustin, SteelWave LLC has sold an adjacent flex-office building for $91 million, bringing its portfolio sale total to $137 million.
That marks a sizeable premium over what the Foster City-based investor paid for the two Tustin buildings in 2019.
In this month’s sale, SteelWave sold a 120,000-square-foot building at 1382 Bell Ave. to the County of Orange for a sky-high $758 per square foot. Larger offices in the area rarely trade for over $400 a square foot.
The $91 million deal is among the largest single-building office sales in OC this year. It’s also near the top among larger office sales by per-square-foot price, according to data from real estate market tracker CoStar Group Inc.
JLL represented SteelWave and its institutional investment partner, Chicago’s GEM Realty Capital, in the sale.
The county’s Sheriff-Coroner’s Technology Division occupies the entire Bell Avenue building, according to county documents.
The Sheriff-Coroner’s Technology Division uses the premises “to house equipment, provide information technology services, service radio communications for all law enforcement agencies throughout Orange County and operate a real-time crime analysis center and Emergency Call Center,” filings indicate.
The two buildings sold by SteelWave are on a nearly 6-acre site across the street from the northwestern edge of the Tustin Legacy development.
In July, Los Angeles-based Rexford Industrial Realty Inc. (NYSE: REXR) paid $46 million, or nearly $477 per square foot, for Airspace, a 96,534-square-foot building at 15771 Red Hill Ave.
Rexford plans to redevelop the office property into an industrial facility after leases for the building’s long-term tenants expire. A date for the lease expirations wasn’t disclosed.
Sheriff Tech Consolidation
Redevelopment plans are not in the cards for the Bell Avenue building, which last year signed the Sheriff’s Department as a full-building tenant under a 20-year lease, and subsequently updated terms of the lease to make it a longer year deal, records indicate. Documents
suggest the technology division of the county-overseen department planned to consolidate operations from four locations to the Tustin spot.
Records from 2021 indicated that the first iteration of the lease initially counted monthly rents of about $2.55 per square foot, with rents ultimately rising to $4.47 per square feet at the end of lease term.
County representatives said at the time that the lease terms were “extremely competitive to the rental market in the Tustin area.”
The lease agreement gave the county a right of first offer to purchase the building, which it exercised after SteelWave said it planned to dispose of the property late last year. It’s financing the purchase via a bond sale.
County filings indicate that the $91 million purchase price includes $17 million in tenant improvements that were agreed to as part of the prior lease, and are still being carried out at the building.
JLL’s team that represented the SteelWave/GEM venture in the sale was Blake Bokosky, Mark DeGiorgio, Michael Leggett, Adam Lasoff, Patrick Burger and Makenna Pete.
$49M to $137M
SteelWave acquired the two Tustin buildings in a $49 million portfolio deal in 2019.
The Airspace building has seen several sales and tenant changes over the past 14 years; it was once the home of jewelry maker Cookie Lee Inc., prior to its 2008 sale for $12 million.
That building was vacant at the time of the 2019 purchase by SteelWave, but not for long. The new owners secured a 78,000-square-foot lease with a unit of Tricon Residential, a company that rents out single-family homes, among others.
“Following the expiration of the current long-term leases, the company intends to redevelop the site,” Rexford said in a company statement in July. “The investment generates an initial 5.1% unlevered cash yield.”