News Summary
The City Plaza office building in Orange County has been sold for a low price of $51.51 per square foot, totaling $18.5 million. The buyer, Surlamer Investments, acquired the underutilized property, which was previously owned by TPG Capital after a foreclosure. Despite its prime location, occupancy has dropped significantly from 94% in 2013 to only 14% at the time of sale. This transaction highlights a stark contrast with current office market trends in Orange County, which are witnessing varied property values and occupancy rates post-pandemic.
Orange County – The City Plaza office building, a prominent 19-floor structure located adjacent to The Outlets at Orange, has been sold for a record low price of $51.51 per square foot, totaling $18.5 million. The buyer, Surlamer Investments, is based in Newport Beach and owned by Fariborz Maseeh. This sale is noted as one of the cheapest transactions for office buildings in recent years within Orange County.
At the time of the sale, City Plaza was significantly underutilized, with only 14% of its total area leased. Surlamer Investments acquired the property from TPG Capital LP, who acquired the building through foreclosure earlier this year. The previous owners, Greenlaw Partners and Walton Street Capital, had defaulted on $64.2 million of unpaid debt that led to TPG Capital’s acquisition.
City Plaza, constructed in 1969 and renovated in 1999, boasts a total area of 369,134 square feet on an 11.3-acre lot. Current tenants include several businesses such as Core Law Group, Courier Insurance Services Inc., and United American Insurance Co. Despite its favorable location, the building’s occupancy has dramatically decreased from a high of 94% in 2013, when the property was sold for $56 million by Greenlaw Partners and Walton Street Capital. Over a decade, these owners returned the keys to TPG after accruing $64 million in debt.
The sale price of City Plaza highlights a stark contrast in Orange County’s office market. For example, a nearby property purchased by Joe C. Wen sold for $106 per square foot, while newer transactions around the region have showcased higher values, with sales ranging from $172 to $415 per square foot. Additionally, recent acquisitions like H&S Ventures LLC’s purchase of Stadium Tower for $72.9 million at $275 per square foot further emphasize the variability in property values across the marketplace.
Industry analysts indicate that the office market in Orange County is experiencing notable shifts in both property valuations and occupancy rates. These trends reflect broader changes within the commercial real estate sector as businesses navigate post-pandemic realities. In contrast to the circumstances surrounding City Plaza, other transactions in the county have demonstrated higher occupancy and more favorable conditions, suggesting a bifurcated market landscape.
The office building, initially developed by City Development Co., has changed hands due to the evolving economic environment. Surlamer Investments, led by Maseeh, who previously founded Intellisense and sold it for $750 million, specializes in managing a diverse portfolio, including investments in education, media, medical technology, and wearables.
This situation poses crucial implications for the future of commercial real estate in Orange County, highlighting the challenges faced by older office buildings in maintaining occupancy levels amidst growing competition and changing tenant needs. As the landscape continues to evolve, the performance of properties like City Plaza will be closely monitored for indications of recovery or further decline in the region’s office market.
The recent sale serves as a bellwether for potential investors and stakeholders in the commercial real estate sector, underscoring the current dynamics and economic challenges affecting property values and occupancy rates across Orange County. Analysts and industry experts remain watchful, as upcoming transactions may reveal further insights into the trajectory of the market.
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Additional Resources
- Orange County Business Journal: Orange Tower Bought for Low Price of $18.5M
- Wikipedia: Commercial Real Estate
- JLL: Office Building Cerro Mission Viejo Sold in California
- Google Search: Orange County office market
- CoStar: Orange County Office Building Trades for Double-Digit Premium
- Google Scholar: Orange County office space conversion
- OC Register: Orange County 7th in Nation for Office Conversion Projects
- Encyclopedia Britannic: Real Estate
- Commercial Cafe: Nonprofit RCOC Expands Orange County HQ
- Google News: Orange County commercial real estate
