Buyer May Build Twin High-Rise Offices in Irvine

In a sign of renewed interest in Orange County’s commercial real estate market, investors have purchased prime Irvine land where they are planning a $200-million development that could include twin 20-story office towers.

The parcels on nine acres in Koll Center Irvine North were purchased by a limited partnership for an estimated $10 million from the Resolution Trust Corp., according to real estate sources.

The 50-acre Koll Center, a prime site near John Wayne Airport, houses headquarters for Taco Bell Corp. as well as offices for Wells Fargo Bank, Texas Instruments and Fidelity National Title.

The buyer, Irvine Holdings LP, is controlled by Texas investor Richard Squires and includes several New York pension funds and other outside investors, according to Scott Barnard of Newport Beach-based ZB Investment Co., a consultant to Squires and former Koll executive.

Barnard said the group is seeking tenants and has not secured financing, but will help develop the buildings once tenants are found. Taco Bell, because of its highly publicized need for more space, is a “likely candidate.”

“It’s as nice a property as anywhere in Orange County,” he said. “People are positioning themselves for the next century. We think the office market here will be coming back and new development will begin. It’s very timely.”

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Unlike the local housing market, Orange County’s office market has been recovering in recent years, with rents increasing in top-notch office buildings.

Large blocks of commercial office space are getting increasingly scarce because the only significant new high-rise construction in the past five years has been the $29-million State Compensation Insurance Fund Building in Santa Ana.

Office vacancy rates, which stood at more than 20% three years ago, were down to 14.6% in December here, about the same as the national average, according to CB Commercial.

Because it typically takes 18 months to develop a high-rise office building, the investors’ timing in buying the Irvine property couldn’t be more perfect, said Al Beaudette, senior vice president with CB Commercial in Newport Beach.

“This is very positive sign. It sends a great message. Given what’s happening with our local office market now, those buildings will probably be very well-timed,” he said. “You can anticipate that we will be needing large additional blocks of space in the next 12 months.”

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The last major commercial land deal in Orange County was last year, when Security Capital Industrial Trust of Denver said it would buy and develop 140 acres in Anaheim and Lake Forest, but mostly undeveloped Foothill Ranch. The company said it would construct office buildings before it had lined up tenants.

Barnard said this partnership would instead be waiting to find tenants for build-to-suit office construction on the site and that building is probably more than a year away. Several companies have already expressed interest, he said.

The land is zoned for 1 million square feet of office space and an additional 3,000 parking stalls.

“Irvine Holdings views this as a long-term investment and will work with end-users to structure transactions to suit their needs,” Squires said in a statement.

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With his partners, Squires has been negotiating to buy the property since last year. A national real estate investor, Squires was formerly affiliated with Rainwater Inc. in Fort Worth, Texas, which owned retail centers and land.

The Koll property was taken over by the RTC from a development partnership between the Koll Co. and Beverly Hills-based Columbia Savings & Loan in the early 1990s.

In late 1994, Chicago real estate magnate Sam Zell bought a 14-story office tower and several surrounding properties in Koll Center Irvine North from Wells Fargo Bank.

The bank had taken the properties back from the Koll-Columbia partnerships. Zell also purchased another office tower in Koll Center about the same time from Cigna Investments.