The Michelson Sets New Mark

The Michelson Sets New Mark

Toronto-based Manulife Financial Corp. has bought The Michelson office tower in Irvine in what’s believed to be the priciest single-building office sale ever in Orange County.

The financial services company, best known in the U.S. for its John Hancock Life Insurance Co. division, recently closed on the purchase of the 19-story Michelson, located in the Park Place mixed-use campus near John Wayne Airport at 3161 Michelson Drive.

The office, built in 2007 next to the San Diego (405) Freeway, was put on the market about five months ago.

Terms of the sale were not immediately disclosed. Sources familiar with the transaction said the 536,000-square-foot building traded hands for more than $500 per square foot, which would put the sale price near $270 million, if not higher.

The transaction appears to be Orange County’s most expensive commercial real estate deal of the year, exceeding the recent sale of the 1,572-room Hilton Anaheim, which is believed to have changed hands this summer for about $215 million.

No other single-building office properties in Orange County are known to have sold at a price above $200 million. Only a handful of larger area office properties have traded at prices about $400 per square foot in the past five or so years, let alone the $500-plus per-square-foot price estimated for the Michelson sale.

Manulife is taking over an office considered to be one of Orange County’s premier buildings. An A-list tenant base and low vacancy rates appear to have helped the institutional investor justify the steep sale price.

Tenants

Tenants at the building include Hyundai Capital America, which has its name atop the office; L.A. Fitness International LLC; Jacobs Engineering Group Inc.; and law firms Gibson, Dunn & Crutcher LLP, Greenberg Traurig P.A., Jones Day and Bryan Cave LLP.

The building is about 93% occupied, according to brokerage data.

Monthly rents at the building average about $3.33 per square foot, with a few tenants at the building paying in excess of $4 per square foot.

Operating Income

The property is expected to bring in net operating income ranging from $16.2 million and $18.8 million over the next three years, according to marketing materials used during the property’s sale.

The Michelson is the latest high-profile office addition to the real estate investment portfolio of Manulife, which counted $504 billion in assets under management as of June.

The company’s real estate portfolio runs more than 19 million square feet, with properties in Canada, the U.S. and Asia. (source: ocbj.com)  READ MORE

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