Terms of the deal were not disclosed, but Maguire says that the sale allows the company, which has been struggling under a big debt load, to eliminate the project-level debt that was scheduled to mature in 2010 and eliminate a master lease obligation with a potential exposure of up to approximately $12 million. The Abbey Co. reports that it closed the deal after a short due diligence period during which it also bought the property's underlying mortgage loan from the property lender.
Abbey, which has owned the adjacent Cityview Plaza office property since 1993, is familiar with the City Parkway complex via the experience of Thomas Clarke, the Abbey Management Co.'s EVP and chief operating officer, who has previous involvement with the property while he worked for former owners Spieker Properties and Equity Office Properties. Clarke says that Abbey's business plan involves establishing an on-site management and leasing office, aggressively marketing the property to prospective tenants and implementing operating efficiencies at the property, where vacancy has fallen to 26%.
Abbey has established what it describes as a substantial budget for capital improvements and leasing expenses for the property, including class A tenant improvements and tenant broker incentives. Kurt Kaufman, Abbey's director of acquisitions, points out that City Parkway had historically maintained high occupancy rates before mid-2008, thanks to its central Orange County location.
Kaufman notes that Abbey acquired the office complex at a price substantially below replacement cost because of the current real estate market disruption. "Our ability to close quickly and without a financing contingency gives us a significant competitive advantage," Kaufman comments.
Kaufman adds that the acquisition is the opening salvo of Abbey's acquisition program over the next two years as the firm intends to acquire substantially more assets throughout California on an all-cash basis. Abbey owns and operates 53 commercial properties throughout California, totaling approximately 5.6 million square feet.
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