The stalled Skyline at MacArthur Place condominium towers in Santa Ana already had the distinction of being Orange County’s tallest housing project at 270 feet high.
Now the twin 25-story towers have a new claim to fame: OC’s priciest apartments.
Palo Alto-based Essex Property Trust Inc. completed the acquisition of the Skyline towers earlier this month, buying the property from the project’s main financier, New York-based iStar Financial Inc.
A deal had been expected. The Business Journal reported in early February that a deal was in the works with the price estimated to be about $125 million at the time.
This month’s sale ended up closing a tad higher, at $128 million. That price still is about 50% below the upscale project’s construction cost, let alone the $300 million-plus value given to the condo tower when it broke ground in 2006.
The property was acquired in a venture between Essex and an unnamed financial partner. Essex will handle management of the property. The investor and developer owns about a dozen apartment complexes in OC and has about 27,000 apartments in total on the West Coast.
Essex isn’t looking to sell the condos, at least not initially. The real estate investment trust plans to lease the 349 homes in the towers—originally designed as ritzy condominiums for $600,000 to $2 million—as apartments.
Last year, Santa Ana’s City Council approved an application by the property’s developer, Santa Ana-based Nexus Cos., to allow rentals at the project, which sits along the Costa Mesa (55) Freeway in Santa Ana’s Hutton Centre.
Essex is set to open a leasing office this week, said Jeff Rowerdink, first vice president of acquisitions.
The deal “was a long-term rental play,” he said.
If the housing market returns, he said Essex could look to turn the project into condos again.
The company first explored buying the loan on the property from iStar about a year ago but backed away “when the world fell apart,” Rowerdink said.
Even though Essex got the towers at a discount to their construction loan, it still is paying top-dollar for the development as an apartment investment.
The Skyline project appears to have broken several local records for apartment sales.
The $128 million sales price is the highest reported price paid for an individual OC apartment complex in at least 10 years, according to Business Journal records.
Only a handful of sales have topped the $100 million mark in that time; a $123 million buy of a Newport Beach complex in 2004 set the previous high-water mark for the county.
At $367,000 per apartment, the Skyline towers sale also casts a tall per-unit shadow over other area transactions, including those made in better economic times.
At the peak of the local housing and commercial real estate market a few years ago, larger, upscale apartment complexes seldom traded hands at prices higher than $250,000 per unit.
Last year, the median sales price for an apartment was $140,000 per unit, down from a high of $156,667 seen in 2007, according to Marcus & Millichap Real Estate Investment Services Inc.
The most expensive apartment deal seen in OC last year was for the $75 million sale of the Alize at Aliso Viejo complex. That deal traded hands at about $150,000 per unit.
Other new, busted condo projects near John Wayne Airport and Anaheim’s Platinum Triangle that have been reworked as apartment projects of late have traded at higher prices than the market at large, at close to $225,000 per unit.
The previous highest per-unit price seen in OC for a one-time condo project occurred last year, when Aliso Viejo-based developer Shea Properties got $48.5 million, or about $275,000 per unit, for its recently-built Calypso Apartment and Loft complex on Jamboree Road.
Essex expects to get premium prices for Skyline apartments, averaging $3,000 per month, Rowerdink said. Units run from range from 1,018 to 2,800 square feet.
Among high-end apartment complexes in OC, Irvine Company’s Promontory Point in Newport Beach lists month rents approaching $3,800 per month, while its Colony complex at Fashion Island has rents going up to $5,300 per month for its best units.
“We believe that rents in OC will recover faster than other areas given its improving employment outlook and limited supply of competing housing,” Essex Chief Executive Keith Guericke said in a statement.
