“There are thousands of buildings in Orange County that can be repositioned to meet the demands of the current market,” Peter Schafer, project manager, Guthrie Development Company, tells GlobeSt.com. “It is up to the local users and real estate professionals to unlock these opportunities.” The firm is executing a value-add strategy on office properties in the Orange County market, and says that there is plenty of opportunity. We took a look inside one of the company's recent projects, the Placentia Office Park. Guthrie purchased the property in June 2017 and executed a quick repositioning plan. The result: the company sold it to strong interest from investors and multiple offers.
“At Placentia Office Park, the buildings have traditionally been the best in the small submarket,” Schafer tells GlobeSt.com “The previous owner was compelled to sell the property due to external forces that did not relate to the specific property. The properties were well maintained, but some building systems had reached the end of their useful lives including the roofs and parking lot surfaces. We completed our renovations immediately after acquiring the project. The previous owner also improved the common areas by adding outdoor seating and replacing the HVAC systems, which significantly improved the property for existing and new tenants.”
The renovations were focused on restoring the property back to its best quality, as opposed to converting the property into a different use, like creative office. Instead, the property will continue to focus on traditional tenants. Guthrie repaired the roof and parking structure as well as completed superficial improvements, like paint. “Altogether, these improvements ensure that Placentia Office Park remains the top office project in the market for years to come,” says Schafer. “The features will help attract new tenants, but more importantly, they will help retain existing tenants at the buildings. We were able to negotiate a couple renewals in our very brief ownership period and we expect the future owners to do very well on renewals too.” In addition to the renovations, the firm also executed a lease-up strategy to stabilize the property and bring rents to market rate.
The firm is experienced at restoring Orange County industrial product as well as office assets. Prior to Placentia Office Park, Guthrie executed a similar strategy at 4200 Bonita, a 67,950-square-foot freestanding, single-tenant industrial building in Fullerton. “We had acquired the functionally obsolete manufacturing building in December 2016 and renovated it into a high-end, modern, multi-purpose industrial building positioned for an owner/user,” says Schafer. “We loved the location and we had to transform the building to match the market and users in the market. We demolished interior build-out and exterior structures, relocated an easement, added eight loading doors, and renovated 10,000 square feet of office space.”
Both projects had short repositioning timelines, which Schafer says helps to mitigate risk. “Bonita was acquired and sold in thirteen months, which included some lease back time to the original seller, and Placentia was eight months, he says. “The short timeframes keep the risk profile of these projects within acceptable limits to our investors.”
For Guthrie, the orange County market is the ideal place to execute these strategies. “Building renovations, along with subdivisions, are a focus at Guthrie Development, especially in Orange County,” he says. “Renovation and redevelopment of existing property will be the key driver of value on the supply side as this market matures and runs out of available land for new development. Orange County has tremendous room for economic growth as a whole and each submarket has its own opportunities to bring old property up to meet the current demands of users.”
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Kelsi Maree Borland
