ORANGE, CA-The CB Richard Ellis Strategic Partners USOpportunity 5 fund has taken ownership of the 386,000-square-footOrange City Square office and retail project after buying anon-performing first mortgage note secured by the property andforeclosing on it. The new owner, citing its forecast for improvingmarket conditions, sees upside in the class A property through thepotential to fill the 40% vacancy at the project, which is afour-building campus composed of 373,775 rentable square feet ofoffice space and 12,392 rentable square feet of retail space onapproximately 14 acres along the Garden Grove (SR-22) Freeway atthe City Drive South.

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“Our forecasts call for a strong market recovery to take holdwithin the next 12-18 months as employment begins to recover,resulting in improved office occupancy levels and strengtheningrents,” says principal Phil Hench of CBRE Strategic Partners US.Hench notes that the ownership’s new basis in the property issubstantially lower than peak pricing and replacement costs andthat the new owner is well-capitalized.

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Opportunity 5 fund acquired the note secured by Orange CitySquare in a transaction in which the seller was represented by theCB Richard Ellis team of Bob Smith, Paul Jones and Karen Scholte inthe company’s Newport Beach office. The team also recently brokeredthe $14.75 million sale of an 89,063-square-foot office building inthe City of Orange in conjunction with Kevin Shannon of CBRE’sSouth Bay office.

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Smith, commenting on the Orange City Square transaction,describes the property as “an institutionally owned and maintainedclass A mixed-use campus” that “is positioned to capitalize on thecounty’s rebound and forecasted growth over the near-term.” CBRichard Ellis Investors is planning a capital improvement campaignthat includes the firm’s 5-Star Worldwide service program designedto provide services and amenities to further enhance tenantsatisfaction. The 5-Star program combines a concierge service,building conference center, fitness center and other services.

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Additionally the new owners will initiate a marketing campaignto rebrand the property, highlighting the new ownership, leasingand property management. CBRE Strategic Partners U.S. Opportunity 5fund is a commingled private equity real estate fund sponsored byCB Richard Ellis Investors and raised from institutional investorsin the United States, Europe and the Middle East.

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In the other City of Orange transaction, the CBRE teamrepresented an undisclosed pension fund that sold the 89,063 squarefoot building at 725 Town and Country Rd. to Scientific InvestmentsLP with Cypress Office Properties as its adviser. The five-story,class A building sits on 3.1 acres and is 90% leased to multipletenants.

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Smith says that the property “provides the buyer the uniqueopportunity to purchase a strategically located, high-qualityoffice building that has demonstrated consistently high occupancy.”This is the second office building to sell on Town & CountryRoad since June, when 999 Town & Country, a 99,551-square-footbuilding, was purchased by Kilroy Realty for $22.25 million.

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