Los Angeles-based Maguire will acquire what Robert F. Maguire III, chairman and co-CEO of the office REIT, describes to GlobeSt.com as a superb project at an outstanding location. Maguire Properties is buying the eight-building, 15-acre office campus for approximately $150 per sf, well below a replacement cost that would likely be about $250 per sf, Maguire notes. He cites sales of other Orange County office properties that have topped $225 per sf, and he tells GlobeSt.com that the Park Place project holds considerable potential for upside in rents as the office market improves.

"It's an incredibly distinctive project architecturally, and it was superbly built by Fluor," Maguire says, referring to the development's origins in the late 1970s as the headquarters for the Fluor Corp. engineering and construction company. Due diligence on the property produced "rave reviews about the quality of the buildings, which have been very well maintained," Maguire says. Other factors that made the property an attractive buy included its tenant mix, amenities both on-site and nearby, and the barriers to entry for other office development in the area, Maguire adds. The development is 96% occupied, and about 75% of the tenants are investment grade, including names like ConAgra, State Farm Insurance, Washington Mutual, Etrade, Balboa Insurance, Caltrans and Cingular Wireless. On-site amenities include a 1,500-seat food court, an auditorium, a conference center and support retail, with nearby off-site amenities including an Edwards Cinema, Houston's Restaurant, Ruth's Chris Steak House and California Pizza Kitchen.

Office rents average a little under $21 per sf per year gross at Park Place, Maguire tells GlobeSt.com, with a lease rollover rate of about 6% of the space per year over the next five years.

"There is a big upside, potentially, when the leases roll and the market gets back to stabilization, which most of the leading brokers believe will be about two years," Maguire says. Assuming the market improves as hoped, he estimates Park Place could command rents of about $31 per sf per year when tenants sign new leases.

The eight Park Place buildings include one 10-story office tower, six four-story office buildings and a concourse building, located at the intersection of Jamboree Road and the San Diego Freeway (I-405) in the John Wayne Airport office market. Maguire calls the acquisition "an expansion into an important region of Southern California" for the office REIT, which is the largest owner and operator of class A office properties in the Los Angeles central business district. The $260-million purchase price includes the assumption of the existing mortgage and mezzanine financing of approximately $164 million.

The sale will mark the second time in a little over a year that the Park Place property has changed hands. The Blackstone affiliate had owned the property since late 2002, when it acquired the office campus from an affiliate Oaktree Capital Management for approximately $200 million.

Instant Insights /

Maguire Properties Buys Park Place for $260M

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