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CBRE Global Investors Acquires Irvine Office Bldg for $120 Million

Why the Market is Heating Up in the OC
January 9, 2018
Downtown Los Angeles-based CBRE Global Investors scooped up 2600 Michelson Dr., a 16-story office building in Irvine, CA, for $120 million, or about $390 per square foot, from Ocean West Capital Partners and Dune Real Estate LLC in a sale that shows what a hot market Irvine has become.

The 16-story, 311,000-square-foot, 4-Star office property is 99 percent occupied with major tenants including Zillow, Premier Business Centers, Jacobs Engineering and Loan Depot.

The last two tenants made the difference for Ocean West Capital Partners, according to Kevin Shannon, West Coast president at NKF Capital Markets, which represented the company in the sale.

"Ocean West completed their reposition and lease up strategy with the Jacobs Engineering and Loan Depot leases," Shannon said. "Ocean West reached 99 percent occupancy with those two leases, which transitioned the asset to a core investment profile."

The leases, along with the current market, made it a ripe time to sell.

"Capital market conditions for both debt and equity are ideal for monetizing well located core asset profiles like 2600, which is why Ocean West decided to sell," Shannon said.

The property also has some distinct advantages, including unobstructed views and its location, according to Paul Jones, a senior managing director at NKF Capital Markets in Newport Beach.

"It’s a real iconic building in the (John Wayne) airport area," Jones noted.

An added benefit is its proximity to the 405 Freeway.

Ocean West purchased the building from MPG Office Trust, Inc. back in June 2011 for $70.15 million, or $228 per square foot, according to CoStar data.
See CoStar COMPS #2137555.

The building was around 70 percent leased at the time, according to Jones.

Ocean West has since done improvements to the property, including the HVAC, lobby, elevators, roof, restrooms, parking and the building’s corridors, Jones said. The new tenants also have new buildouts.

2600 Michelson was built 32 years ago on five acres in the Irvine submarket of Orange County.

Shannon, Jones, Ken White, an executive managing director at NKF Capital Markets in El Segundo, Brunson Howard, a senior managing director at NKF Capital Markets in San Diego and Blake Bokosky, a director at NKF Capital Markets in Newport Beach, represented Ocean West Capital Partners in the sale.

CBRE Global Investors handled the sale in-house.

About eight class A properties have sold within the last 12 months in proximity to 2600 Michelson, according to Anthony DeLorenzo, a senior vice president at CBRE, Inc., in Newport Beach.

Some of those properties include: Von Karman Towers at 18301 Von Karman Ave., Newport Corporate Tower at 4100 Newport Place Dr. and Main Plaza at 2010 Main St. in Irvine.

Although CBRE Global Investors is an affiliate of CBRE, Inc., DeLorenzo would not speak specifically about the sale of 2600 Michelson. He noted that, in general, the area where the property sold is a draw for a variety of reasons.

“It’s a great confluence,” DeLorenzo said. “It’s easy access to the decision-making populace and employment bases. It’s a great market to invest in, and it’s Orange County’s core submarket which is why capital is interested in investing there.”

Irvine native Jason Krupoff, who is also a senior vice president at Irvine-based Bellwether Enterprise, agreed that the city is the place to be right now.

"As a native of Irvine, I have witnessed tremendous growth in and around Irvine and Orange County," Krupoff said. "The Irvine market is red hot. Developers and investors want to own office, and all real property, in Irvine. The Irvine office market is experiencing extremely strong fundamentals."

Irvine also has little new office supply being added to its inventory, which is increasing rental rates, and developers are seeing their property values increase as a result, according to Krupoff.

Other companies that have flocked to Irvine in recent years include SpaceX. It signed a five-year lease in 2016 for an 8,000-square-foot creative office space in a three-story building near Jamboree Rd. and Barranca Pky. in Irvine.

Karen Jordan, Los Angeles Market Reporter  CoStar Group   
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