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NEWPORT BEACH, CA-Locally based AMG Realty Investors and NBS Real Estate Capital of Portland, OR have closed on the acquisition of a 40,115-sf office building at 180 Newport Center Dr. in what is described as a complex transaction requiring a unique structure. The joint venture of AMG and NBS bought the building for nearly $11.8 million from Davenport Partners in a deal that was engineered by Buchanan Street Partners and is described as a value-add play.

Tim Hawthorne, EVP at Buchanan Street Partners, says the deal required “a unique structure” because of the complexities involved in underwriting the property under the terms of its ground lease. Buchanan wore a number of hats in the transaction, with its investment sales division representing seller Davenport Partners while its structured finance specialists negotiated the acquisition financing on behalf of the buyers.

In addition, Buchanan Street Partners provided the joint venture equity to Davenport Partners in 2005, when the occupancy rate at the building stood at 68%. At the time of the sale to the AMG-NBS joint venture, the two-story building was 100% occupied to 45 tenants at rents substantially below market rates.

The permanent financing for the 180 Newport Center Dr. property features a 10-year initial term with an automatic 10-year extension option. The loan is “competitively priced over a 20-year Treasury yield,” Hawthorne says.

AMG will maintain an office in the building to manage and lease the property, which was built in 1974 and was renovated in 1994, 2003 and 2006. The class B property, at the corner of Anacapa and Farallon drives, occupies a location featuring prominent signage on Newport Center Drive, a ring road around the Irvine Co.’s 1.3-million-sf Fashion Island regional mall.

NBS and AMG see upside in the initial cash yields from 100% occupancyand growing cash returns by rolling rents to market rates. In addition, they see potential to realize additional upside by increasing revenue from parking, signage, storage and a possible executive suites component.

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