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REAL ESTATE: $52M deal company’s biggest in five years

Orange County Business Journal

Irvine-based Bixby Land Co. has made its largest acquisition in nearly five years—buying an office building in Torrance.

The commercial real estate operator and investment manager last week closed on the purchase of South Bay Tower, a 291,711-square-foot building near Del Amo Fashion Center in Torrance. The eight-story property, located at 21250 Hawthorne Blvd., traded hands for $52 million, or $178 per square foot.

TA Associates Inc., a Boston-based pension fund advisor, was the seller.

The buy caps a busy few months of activity for Bixby, which recently sold off a fully-leased trio of Lake Forest offices for $22 million, and landed a big tenant for one of two Silicon Valley offices its owns and recently refurbished.

The Torrance deal is “absolutely consistent” with Bixby’s strategy during the past two years, which has been to focus on buying value-add properties. That means going after buildings that either require physical improvements, a boost in occupancy rates, or both, Bixby Chief Executive Bill Halford said.

Portfolio Value
"We continue to seek ways to improve the value of our portfolio holdings through the strategic acquisition of properties that provide significant upside in value," Halford said.

The company’s portfolio now runs about 6 million square feet of office and industrial space; its assets under management are valued at about $1 billion.

Both property improvements and a change in leasing are in store for the South Bay Tower, which is about 63% leased.

"We're going to try to do some different things," Halford said.

He described the office as “clearly the best building” in the South Bay office submarket, which draws companies whose executives tend to live in nearby areas like Manhattan Beach and the Palos Verdes Peninsula.

Torrance’s office market runs about 4.3 million square feet, with a vacancy rate of about 15%, according to data from Colliers International.

The South Bay Tower building counts environmentally friendly features as well as floor sizes that range from 24,000 square feet to 47,000 square feet.

Bixby said it plans to invest an additional $6 million in the property to improve the building’s lobby, common areas and landscaping.

The company also is planning a shift in leasing strategy for the property, which counts Bank of America, Wells Fargo Insurance, Morgan Stanley Smith Barney and the Daily Breeze as tenants.

Halford said the plan is to rework the building to accommodate smaller users, a change from prior ownership, which looked to land larger-sized tenants for its empty space.

Bixby plans to create make-ready office suites in the 2,000- to 10,000-square-foot range.

Leasing Team
The company has yet to name a leasing team for the just-bought building, which traded hands for about half of its expected replacement cost, according to Bixby.

TA Associates in 2005 reportedly paid $69 million for the 24-year-old building, previously known as the Computax Tower.

Expect to see Bixby involved in more buys like South Bay Tower rather than sales, Halford said. Bixby recently sold a trio of buildings in Lake Forest that are largely leased to Panasonic Avionics Corp., in a $22 million deal with Palo Alto-based Menlo Equities LLC.

Orange County remains an area that Bixby is actively eyeing acquisitions, although there haven’t been too many suitable deals for the company in the area of late, Halford said.

Much of the company’s activity in 2012 has been in Silicon Valley, where Bixby recently finished up refurbishment work on a pair of Santa Clara office projects it owns that total about 400,000 square feet.

One of those Santa Clara properties was recently leased to network infrastructure company Infloblox Inc. for its new headquarters. The eight-year lease, running about 127,000 square feet, is valued at more than $25 million.