Shuwa Selling 8 Premier O.C. Office Properties

A Newport Beach real estate investment group is about to acquire at least eight premier Orange County office buildings--including the headquarters of Taco Bell in Irvine--knowledgeable real estate sources said.

Layton-Belling & Associates, in partnership with Boston pension fund advisor AEW Capital Management, will pay more than $150 million for more than 1 million square feet of office space, sources said. The seller is the U.S. affiliate of Japan’s Shuwa Corp., which went on a substantial property-buying spree in the 1980s, only to see values fall with the subsequent recession.

Now that rents and values have recovered, Shuwa Investments Corp. has worked to sell its vast U.S. real estate holdings. Layton and AEW Capital would acquire most of Shuwa’s top Orange County buildings through a transaction expected to close within the next several weeks.

Among the larger buildings in the deal are the 12-story Taco Bell headquarters at 17901 Von Karman Ave. in Irvine, the nine-story MacArthur Plaza at 19000 MacArthur Blvd. in Newport Beach and the eight-story Downey Savings building at 3200 Bristol St. in Costa Mesa.

Layton-Belling officials declined to comment about the sale, and Shuwa executives didn’t return phone calls.

Los Angeles-based Shuwa Investments last year reviewed bids from several prominent real estate investment operations for its entire remaining portfolio--then totaling about 8.5 million square feet and featuring a roster of prominent California buildings.

The privately held company later decided to sell individual buildings or groups of buildings. In April, New York real estate investment powerhouse Westbrook Partners and the U.S. arm of Montreal’s Divco Ltd. purchased Shuwa’s pair of prime Century City towers, along with top buildings in Boston and Chicago, for a reported $560 million.

The Layton-Belling deal comes as the Orange County office market’s outlook appears bright. According to brokerage Grubb & Ellis Co.’s midyear report, Orange County office rents jumped an average of nearly 25% in 1998--eclipsing the monthly average rate of $2 per square foot for the first time.

Although Grubb & Ellis cautioned that rents won’t rise as quickly going forward, developers have responded to generally strong demand and a relatively low vacancy rate of 9.2% with nearly 2.7 million square feet of office projects under construction at the end of the first quarter.

The pending transaction should benefit all parties involved, said veteran office broker Bob Smith of CB Richard Ellis’ Newport Beach office. The new owners presumably negotiated a discount for buying in bulk, and Shuwa would dispose of a large chunk of its portfolio at a fair price during a favorable point in the real estate and economic cycles.