Lincoln Eyes Long-Term Upside in $76M Orange County Buy

Lincoln Property Co. has snapped up the Towers at Bella Terra, a 420,000-square-foot office and retail complex in Huntington Beach, Calif., in a $76 million cash transaction green-lighted by the state Superior Court.

October 31, 2011
By Barbra Murray, Contributing Editor

Lincoln Property Co. has snapped up the Towers at Bella Terra, a 420,000-square-foot office and retail complex in Huntington Beach, Calif.  In a $76 million cash transaction green-lighted by the state Superior Court, Lincoln took the property off the hands of Trigild, which had acted as receiver since May 2010.

Acting in partnership with GEM Realty Capital Inc., Lincoln purchased the 25-year-old property in a steal of a deal that marked a 45 percent discount to the property’s price tag when it last traded in 2007 and a 28 percent discount to the previous loan balance. “Clearly we’ve underwritten appropriately for the economy we’re in and hopefully it will be a nice longer-term hold for us,” Lincoln senior vice president Kevin Hayes told CPE.

Located in the West Orange County submarket, the Towers at Bella Terra sits on a nine-acre parcel within the 70-acre Bella Terra mixed-use community developed by DJM Capital Partners. Constructed 25 years ago, the Towers complex consists of two six-story buildings and one 12-story tower encompassing 382,800 square feet of office space, plus two retail pads totaling approximately 46,000 square feet.

The property is just 65.4 percent leased, but the new owner is undaunted by the relatively high vacancy. Lincoln, which is presently planning the rebranding and repositioning of the Towers, is in talks with two prospective users that are vying for a vacant 95,000-square-foot building in the complex. “We see Orange County fundamentals beginning to improve,” Hayes explained. “We have positive absorption this year for the first time in four years and we’re seeing real organic job growth and some trends towards technology.”

Lincoln has different plans for the two retail parcels, which are occupied by 24-Hour Fitness and a Buca di Beppo restaurant. “Those are not part of our core strategy of holding so we’re going to look at disposing of that real estate here in the coming years,” he noted.

Counting its most recent acquisition, Lincoln has added more than 1.5 million square feet of assets to its Southern California portfolio this year.  In July, the company joined forces with Morgan Stanley on the $319.9 million purchase of the 950,000-square-foot Parsons Campus in Pasadena. Diversity is at the heart of Lincoln’s acquisition and development strategy, Hayes reported.

“We’ve bought fully stabilized core real estate here in California; we are under way on a ground-up retail development project; and then obviously we’ve bought a number of distressed-type properties,” he said. “In today’s world, clearly, buying the existing product that needs a good sponsor is an easier story to tell. It’s certainly less risky than trying to develop something, and oftentimes we’re buying the asset at half its replacement cost.”