307,700-SF Orange County Building Trades for $70M

Office property values are ticking up, but steal-of-a-deal transactions have not disappeared entirely. Case in point: The approximately 307,700-square-foot office tower at 2600 Michelson Drive in Irvine, Calif., just sold for $70 million.

July 15, 2011
By Barbra Murray, Contributing Editor

Office property values are ticking up but steal-of-a-deal transactions have not disappeared entirely, as evidenced by a recent transaction involving the approximately 307,700-square-foot office tower at 2600 Michelson Drive in Irvine, Calif. Dune Real Estate Partners joined forces with Ocean West Capital Partners to purchase the Class A building for $70 million.

Located in Irvine’s Airport Area submarket, 2600 Michelson last changed hands in 2007 when previous owner Maguire Properties Inc. acquired the 16-story tower as part of a $2.9 billion purchase of former Equity Office Property assets from the Blackstone Group. Financial challenges would follow for Maguire. The company morphed into MPG Office Property Trust Inc., which, in cooperation with the special servicer on the $110 million mortgage loan secured by 2600 Michelson, sold the property to Dune and Ocean West. The new owners snapped up the distressed asset at a figure that amounts to less than half of its peak pricing of nearly $500 per square-foot in 2007.

Now that the Orange County office building is under its control, Dune and Ocean are moving full steam ahead with a repositioning and leasing program to increase 2600 Michelson’s 52 percent occupancy rate. The partners see the glass as half-full, not half-empty. “We’ve seen early signs of improvement in the Orange County office market and believe there is significant value in its long-term fundamentals,” Dune’s Russell Gimelstob said.

The office vacancy rate in Orange County dropped from 17.2 percent in the fourth quarter of 2010 to 16.7 percent in the first quarter of 2011, according to a report by commercial real estate services firm CB Richard Ellis Inc. The largest declines occurred in the Class A sector, and the Greater Airport Area, home to 2600 Michelson was among the two submarkets that experienced sizeable vacancy decreases.