Orange County Office Campus Trades for $40M

Palm Terrace. Photo Courtesy of Newmark.

Kingsbarn Real Estate Capital has acquired Palm Terrace, a 155,795-square-foot Class A office campus in Lake Forest, Calif., for nearly $40.5 million from Bailard Real Estate Fund. 

Palm Terrace last traded for $30 million in 2015, according to CommercialEdge, when a joint venture between Bailard and CT Realty acquired the asset from LaSalle Investment Management.

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A Newmark team, comprised of Co-Head of U.S. Capital Markets Kevin Shannon, Executive Managing Director Paul Jones and Senior Associate Brandon White, acted on behalf of the seller. Kingsbarn was self-represented. The deal marks the investor’s second office acquisition in South Orange County. According to CommercialEdge, the company acquired a 34,556-square-foot building in Aliso Viejo last year for $16.8 million.

Palm Terrace comprises three two-story buildings located at 25521, 25531 and 25541 Commercentre Drive. The property features open floorplates, energy-efficient lighting and an outdoor common area. Parking is available at a ratio of 4 spaces per 1,000 square feet. Palm Terrace is about 12 miles from downtown Irvine, Calif., and is within 4 miles of Interstate 5 and State Route 241.

A variety of tenants are present in the building, including Del Taco, PGM Holdings, Hometown Equity, Citadel Servicing and Anyone Home. Newmark’s Jones noted that the stabilized and diversified rent rolls were a key factor in attracting a buyer. The brokerage oversees leasing services for the property, and, during the due diligence phase, the team increased the asset’s occupancy from 96 percent to 100 percent, Jones told Commercial Property Executive.

Challenges in the sector

Though the office sector is slowly recovering, there is still a long way to go. Only 12 office properties, totaling about 920,800 square feet, traded in Orange County during the first five months of 2021, CommercialEdge data shows. Palm Terrace traded at $259 per square foot, falling short of the $275-per-square-foot average recorded year-to-date in Orange County.

“The Orange County market continues to rebound as we move past COVID-19 and the vaccines continue to roll out. Companies are starting to come back to the office, and we expect this to continue through Labor Day. The leasing market is picking up, and we are starting to see investment sales get closed,” Jones added.

The market’s leasing activity had already dramatically increased in the first quarter, boosted by defense contractor Anduril Industries’ 640,000-square-foot office lease at Invesco and SteelWave’s The Press in Costa Mesa. The deal was the largest Orange County office lease in a decade and a half.