In Orange County’s largest office sale of 2024 to date, the 2020 Main tower near John Wayne Airport traded for nearly $54 million.
The off-market deal works out to about $198 per square foot, roughly half of what a high-end office tower near John Wayne Airport could expect to trade for before the pandemic.
The 271,106-square-foot building’s new owner is Ontario-based MGR Real Estate, the same firm that was behind the $92.5 million sale of Costa Mesa’s Canvas campus in July 2023, OC’s top office deal of last year.
The five-building Canvas property traded for about $8 per square foot.
By comparison, neighboring tower 2050 Main traded last October for $183 per square foot, bought by Irvine-based Greenlaw Partners.
“We’re confident that the OC market is recovering, and people are coming back to work,” MGR Chief Executive Mike Rademaker, an OC resident, told the Business Journal.
Moreover, “OC is one of the nicest places in the country to live and work,” he added. “It would be foolish to not take advantage of the properties here when they’re, quite frankly, on sale.”
MGR bought the 12-story 2020 Main tower, part of the 48-acre Irvine Concourse campus near John Wayne Airport from PGIM Inc., the asset management business of insurance company Prudential Financial (NYSE: PRU), according to real estate market data tracker CoStar Group Inc.
23% Discount to 2001
The latest valuation is 23% less than the price it traded for over two decades ago.
A PGIM real estate fund, named PRISA, bought the 12-story tower for $70 million in 2001.
That deal worked out to around $258 per square foot.
The property was 93% leased at the time of the sale, according to CoStar. Today, its occupancy sits at around 67%.
“We have a good tenant mix,” with several national companies, Rademaker said.
Notable tenants currently include PwC, New York Life Insurance Company, Voit Real Estate Services and Pure Financial Advisors LLC, among others.
MGR recently secured an unidentified tenant for the building’s 12th floor.
The company aims to continue leasing the office up, bringing its occupancy level to around 80%.
MGR hopes to do the same with other OC offices, as it remains bullish on the sector’s recovery.
The company is currently on the hunt for more offices to buy up in OC.
“We’re not stopping,” Rademaker said.
MGR, founded in 1983, owns and manages nearly 3 million square feet of office and retail assets in the Inland Empire, and manages a multifamily portfolio nearing 17,000 units.
Decrease in Downsizing
MGR isn’t the only buyer to take advantage of OC properties’ low-price tags.
Prior to the company’s investment in 2020 Main, four of the five top office sales in OC were bought by owner-users.
The now-second-largest office sale, 45 Enterprise in Aliso Viejo, traded for $44 million in an owner-user deal. The buyer, medical device maker MicroVention Terumo, is planning to move into the space this fall.
Activity among owner-user buyers is at an all-time high, according to brokers. Investors that have lost faith in the office sector are avoiding towers, allowing companies to claim local real estate at record-low prices. In an otherwise less troubled office market, owner-users would be paying a premium for such buildings.
The local office market has shown some indication of improvement over the past few months.
OC saw less space downsized by companies leasing in the area first quarter this year than fourth quarter 2023, according to a report by CBRE Group Inc.
The vacancy rate remained stable, at 14.3%, from fourth quarter 2023 to first quarter this year.
The rate reached its four-year peak in third quarter 2023, at around 14.5%. The lowest it’s been over the past five years was in first quarter 2019, when offices vacancies sat at around 9.5%, according to CBRE data.
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