Granite Properties, a Plano, Texas-based real estate investor, has bought the Orange City Square office complex and has plans for more local deals.
The privately held company recently closed on Orange City Square, a four-building office complex off the Garden Grove (22) Freeway, in one of the larger office sales seen in OC this year.
Terms of the sale weren’t disclosed. The complex, which runs 386,000 square feet, is believed to have traded hands for more than $80 million.
It is the first property in Southern California for Granite Properties, but the company is looking to buy as much as 3 million square feet of offices in OC, L.A. and San Diego over the next two or three years, according to Tom Miller, a managing director who runs the company’s L.A. office.
Granite said it has bought or built more than 20 million square feet of commercial real estate, totaling $3.4 billion, across the country over the past 20 years.
Local deals are likely to be “core-plus and value-add” type investments similar in nature to Orange City Square, according to Miller, who joined the company earlier this year.
“This is a great first property,” he said.
Granite’s eyeing buildings around John Wayne Airport for its next deal, and it also is considering other properties around Central OC, said Miller, a former senior vice president at Newport Beach-based Irvine Company who worked on acquisitions and asset management for the company’s office division.
Miller also counts local development experience—while working with Fort Worth, Texas-based Crescent Real Estate Equities he partnered with Houston-based Hines Interests LP to build the 2211 Michelson office tower, which opened in 2007.
Granite has a few development projects in the works elsewhere in the country but isn’t expected to be break ground on any Southern California properties in the near future, Miller said.
Orange City Square is on a 14-acre site that runs along The City Drive South, just south of The Outlets at Orange shopping center.
Previous Sale
The property changed hands for close to $130 million, near the peak of the last commercial real estate boom in 2007.
It was the most expensive stand-alone office complex in Orange County to sell in 2007.
CBRE Global Investors—an investment unit of L.A.-based brokerage CBRE Group Inc.—took over ownership of the then-distressed complex in late 2010, in a deal valued at about $63.5 million.
Orange City Square was about 60% leased at the time of the 2010 sale. Now the complex is about 88% occupied.
Tenants
Tenants at the complex include Liberty Mutual, Access Insurance, Pediatrix Medical Group, Department of Motor Vehicles, Binder & Binder and Zenith National Insurance.
The complex includes three midrise office buildings totaling 373,619 square feet, with the tallest building running eight stories.
A fourth building counts 12,392 square feet of small retail tenants.
Brokers for the Newport Beach office of CBRE Group listed the complex for sale this summer. A deal close to $85 million was expected at the time.
Orange City Square’s improved occupancy rate has coincided with more than $5 million in upgrades to the property made over the past two years.
Prices Up
A general lack of institutional-quality offices for sale these days is helping drive up prices, said Paul Jones, a vice president for CBRE’s investment property group.
“If you have a deal out there, you should be able to get a good price for it,” said Jones, who worked on the sale along with colleagues Bob Smith, Karen Scholte and Rickey Warner. The sale included the assumption of a loan from New York Life Insurance Co.
Orange City Square’s current management and leasing teams from CBRE will remain on board following the sale, the companies said.
Orange City Square is believed to be the most expensive office sale seen in Central OC this year.
Prior to the deal, that honor went to the 273,000-square-foot Stadium Gateway office at 1900 S. State College Blvd., which was bought by Beverly Hills-based real estate investor Kennedy Wilson this summer for $56 million.
The priciest office sale in the county this year was for Irvine’s Michelson office tower, which was bought by an affiliate of Toronto-based Manulife Financial Corp. for close to $277 million in September.
