Costa Mesa Complex Sold for About $145 Million
A Los Angeles real estate company on Tuesday acquired Two Town Center, a major office and retail development near South Coast Plaza, for an estimated $145 million, in one of the largest-ever commercial acquisitions in Orange County.
CommonWealth Partners bought the structures from Anton Street Associates, a partnership of C.J. Segerstrom & Sons and Prudential Insurance Co. of America.
Analysts said the sale is another sign that the commercial real estate market has rebounded from the deep slump of earlier this decade. In fact, the sale, which fetched an estimated $195 per square foot, could trigger more office construction, analysts said.
“It bodes well for the market in general,” said Robert Smith, senior vice president at CB Richard Ellis Inc. in Newport Beach. “I think it says there is continuing confidence in the market.”
There’s still a lot of wind in the economy’s sails, bolstered by record low unemployment and solid job growth. That should translate into greater demand for new office space, said Gary Wescombe, a partner at E&Y; Kenneth Leventhal Real Estate Group.
“The only difference between buying something today and building something is that you have access to the tenants today, as opposed to a year from now,” he said.
The Costa Mesa complex, which contains more than 600,000 square feet of office space, includes twin 15-story towers anchored by Comerica Bank and Washington Mutual; a five-story office building; four restaurants including TGI Friday’s and El Torito Grill; a single-story retail building; a four-screen cinema, and a five-story parking structure. The purchase is CommonWealth’s second trophy-property acquisition in the past three months. In November, the company bought 801 Figureroa Tower in downtown Los Angeles in a deal valued at more than $87 million. CommonWealth also is a partner in developing the LA Cellular headquarters, a $60-million, 300,000-square-foot project in Cerritos.
“Two Town Center is one of the premier assets in the Southern California development landscape,” said Brett Munger, CommonWealth’s chief investment officer.
Munger said the sale was fueled mainly by Prudential’s desire to free up cash and increase liquidity. Segerstrom officials could not be reached for comment.
Orange County’s commercial property market has been on the upswing recently. Last summer, construction began on the county’s first new office towers in eight years as lease rates climbed 30% through the first half of the year, according to Grubb & Ellis Co., a national real estate brokerage.
And last October, two buildings across the street from South Coast Plaza containing 490,000 square feet were acquired by McCarthy Cook & Co. of Los Angeles and Blackstone Real Estate Advisors of New York City for $91 million.
An earlier bid to sell Two Town Center collapsed late last year when Crescent Real Estate Equities of Fort Worth, Texas, pulled out of a deal to buy half of the complex and the Blue Shield building in Westchester.
That deal, announced last July and valued at about $450 million, included a 1.2-million-square-foot building in the suburbs of Chicago.
That transaction was considered a prime example of how real estate investment trusts had been slowed down in buying properties as building prices soared and the cost of raising money in public markets grew prohibitive.
CommonWealth, founded in 1996 by the former senior executives of Maguire Thomas Partners, teamed up with California Public Employees Retirement System to buy real estate. The two entities own and operate a portfolio of more than $500 million in prime office space in the western U.S.
The duo has more than $750 million in cash and plans to pursue more properties in Orange and Los Angeles counties, Munger said.
