Irvine Co. Signs Law Firm to 15-Year, $60-Million Lease : Real Estate: Deal with Gibson, Dunn & Crutcher is considered a coup. In terms of dollars, it’s among the three biggest deals in county history.
The Irvine Co. has signed one of the largest leases in Orange County with the Los Angeles law firm Gibson, Dunn & Crutcher, a tenant several other large local developers had tried to lure into their buildings.
The law firm’s Orange County office agreed late Thursday to occupy five floors of a 20-story office tower--when the building opens in May, 1992--at Jamboree Center. Construction should start within 60 days.
The Irvine Co. valued the lease--which runs for 15 years and covers 111,000 square feet of office space--at more than $60 million. That makes it one of the three top leases, in dollar terms, ever signed in the county.
Since more than a quarter of the office building’s 400,000 square feet is now leased, the Irvine Co. can construct what will be the fifth and last office tower, known as 4 Park Plaza, at Jamboree Center.
It is also the last office tower the company is likely to build in the Newport Beach and northern Irvine area for some time. The company says it has no more land suitable for office towers in those areas. So for the time being, the huge Newport Beach landowner and developer will build most of its new office buildings in its enormous Spectrum business park in southern Irvine.
Such large deals--though by no means common--are occurring more frequently as the county’s economy grows.
At $60 million, the Gibson, Dunn & Crutcher deal is about the same amount as the Irvine Co.’s shorter, 10-year lease signed last year with Western Digital for 380,000 square feet in a building in the Irvine Spectrum and another 10-year agreement between IBM and C.J. Segerstrom & Sons signed in September for 164,000 square feet in a planned building near South Coast Plaza in Costa Mesa. Then there’s also Taco Bell’s lease with the Koll Co., signed in 1986 for 260,000 square feet and estimated at about $50 million.
Those deals are thought to be the largest in the county so far.
Perhaps only half a dozen tenants as large as Gibson, Dunn & Crutcher are now looking for office space in Orange County. With average vacancy rates high--more than 20% countywide--in local office buildings, the competition for these tenants is intense.
The law firm had been courted by the Koll Co., a big Newport Beach developer that almost had a deal sewn up after lengthy negotiations. The law firm then held talks with Laguna Niguel developer Birtcher, according to local real estate brokers.
One reason the law firm settled on the Irvine Co. was that the developer now has a building permit in hand for its new office tower, said Tooley & Co., a Los Angeles firm that manages Jamboree Center for the Irvine Co. and which negotiated the Gibson, Dunn & Crutcher lease. The other developers do not yet have permits for their office buildings, and the law firm was said to be concerned that the city of Irvine might delay or withhold those building permits as it grows concerned about rapid growth near John Wayne Airport.
The deal with the Irvine Co. was negotiated in a little more than two weeks, an unusually short time for such a large deal. “I’ve never seen one go through that fast,” said Dick Sim, president of the Irvine Co.’s Investment Properties Group.
The law firm--the state’s largest--now occupies 68,000 square feet at the Pacific Mutual Plaza building in Newport Beach’s Newport Center, a stone’s throw from the Irvine Co. headquarters. Pacific Mutual Plaza was sold last year by the life insurance company to the state teachers pension fund.
The law firm employs 400 lawyers and other workers in Orange County. It has been looking for larger quarters for nearly three years. It will occupy five floors in the new building, from the 14th to the 18th. The Irvine Co. will try to lease the top two floors at even higher rents.
One of the nation’s five largest law firms with 700 lawyers, Gibson, Dunn & Crutcher specializes in banking law, corporate securities, finance, real estate, tax and labor law. The law firm said Friday it picked Jamboree Center because the new building gave the law firm room to grow.
The firm’s lease at Pacific Mutual Plaza expires about the same time 4 Park Plaza is scheduled to open. That means the Irvine Co. won’t have to buy the law firm out of its lease, a practice some landlords have used to lure tenants into their buildings.
Even though the Irvine Co. says most of its buildings run much lower vacancy rates than the average because of their exceptional locations, the company admits it had to make concessions to Gibson, Dunn & Crutcher. But neither side will say what the concessions were, though they probably include the usual sweeteners.
The 4 Park Plaza office tower is the fifth and last office building planned for Jamboree Center, which will have 1.6 million square feet of office space.
The $85-million 4 Park Plaza building will be identical to 5 Park Plaza, a 20-story building with a white marble exterior that opened earlier this year with the Geneva Cos. as anchor tenant. That building is 75% leased.
Another identical building, 3 Park Plaza, is under construction and scheduled to open late next year. There is no anchor tenant for that building, but the company said it had leased so much space at Jamboree Center that it decided to construct the building anyway. All three buildings have 400,000 square feet of space.
