High-net-worth investors in some areas of the country are known for collecting an assortment of fancy cars, jewelry, mansions and other luxury items.
That’s true in Orange County too, of course, though over the past year, the richest of the rich also are putting their money into the local office market, collecting an impressive portfolio of top-end properties across the region.
A handful of high-net-worth investors who made their fortunes in areas outside of real estate have spent more than $500 million buying an assortment of large office properties here since early last year, according to Business Journal data.
The deals include seven of the top 20 office sales reported over the period, including four transactions included on this week’s Top Deals list of the 10 largest office sales of 2016.
The influx of private money runs counter to trends in the local office market the prior few years, when the real estate arms of various insurance companies and well-funded local and national real estate investors made the bulk of the area’s most expensive deals.
Local brokers aren’t complaining. The new deals source helped make 2016 a strong year for office transactions, despite a lack of deals involving more traditional investors in the latter part of the year.
“Despite the reticence of many institutional investors to acquire suburban office buildings in 2016, capital market deal volume actually increased in Q4 due to the significant appetite from private high net worth investors for class A office product in Orange County,” said Jeff Cole, managing executive director of the Irvine office of Cushman & Wakefield Inc., in recent year-end market commentary.
“The hesitation on the part of institutional investors, however, did not stem from a conviction that the fundamentals of the OC office market were askew, rather, it partially stemmed from a fear of being unable to secure tenants at necessary lease rates to justify investments in what is now the seventh year of a long recovery,” Cole wrote.
Redlands Billionaire
Cole’s team was part of the largest office transaction last year—the five-building office campus in Irvine that holds Google Inc.’s local operations.
The 573,000-square-foot Google Center, a multibuilding campus on Jamboree Road, sold in late October for nearly $255 million, the priciest reported sale in OC in several years.
Property records show the buyer was an entity controlled by Jack Dangermond, founder of digital mapping company ESRI in Redlands in San Bernardino County.
The deal was the first known property investment in Orange County for Dangermond and his wife, Laura, who have a fortune Forbes magazine estimated at $3.3 billion. The couple founded what originally was called Environmental Systems Research Institute in 1969. The privately held company is the market leader in software used for creating digital maps, and reportedly has annual sales of about $1 billion.
One of ESRI’s competitors is Google, whose Orange County operations are based in the newest building at the recently purchased Irvine campus.
The glass-sheathed, 140,000-square-foot building at 19510 Jamboree Road opened in 2014. The rest of the campus opened in phases starting in 2005.
Monster Year
Two execs at another Inland Empire-based company, Corona-based Monster Beverage Corp., didn’t make the priciest office purchase in OC last year, though they made up for that by buying in bulk.
Ventures headed by Rodney Sacks and Hilton Schlosberg, the top two executives at energy drink company Monster, have been involved in local office purchases valued at close to $275 million over the past few years, more than half of those last year.
The biggest reported deal by the two executives, who each have a fortune estimated by the Business Journal at about $2.5 billion, was last year’s buy of Savi Tech Center, a four-building business park just off the Riverside (91) Freeway in Yorba Linda that sold for about $95 million, the fourth biggest office transaction last year.
Sacks and Schlosberg also led the December buy of Tustin Centre, a two-building office complex overlooking the Costa Mesa (55) Freeway near East 17th Street. The property traded hands for a little more than $80 million in the year’s fifth largest deal. The duo bought it in a venture with Irvine-based Greenlaw Partners, according to real estate sources. Sacks and Schlosberg also have worked with Irvine-based PRES Cos. on a number of local transactions.
Other wealthy investors recently targeting the area’s office market include local businessman Joe Wen, who heads Cypress-based provider of high-end paper products Sakura Paper Inc.
A venture led by the Newport Beach resident recently paid about $40 million for Towne Centre Plaza, a three-building office campus in Foothill Ranch that holds the headquarters of mortgage lender LoanDepot Inc. and other tenants.
Wen-backed entities have spent more than $100 million on local commercial property buys over the past few years. Other deals include an office park in Santa Ana and a Costa Mesa industrial site where a redevelopment is planned.
Other wealthy SoCal residents are buying area development sites, according to property records.
Last month, the Business Journal reported that an entity headed by the family of wealthy Riverside County businessman and real estate investor Dennis Troesh bought a roughly six-acre site next to the Santa Ana Zoo last year in a deal estimated at around $18 million.
The new owner last month proposed building the 601-unit Prentice Park Residences apartment project at the 1660 E. First St. site.
Troesh previously owned Corona-based Robertson’s Ready Mix, one of the largest ready-mix and construction aggregate operations in the western United States.
Mitsubishi Materials Corp. in Japan bought out the company in 2013 for a reported $2.2 billion, and Troesh and various family members have since been reported to be active real estate investors. He has been cited in national and trade reports as partnering with other groups on a series of deals, including buys of large office properties in Florida, North Carolina and New Jersey.
Another family member, Jeff Troesh, runs Corona-based Watermark Properties, a developer and investor that likely would be involved in the Santa Ana apartment project.
