Transwestern Facilitates Office Asset Redevelopment into Creative Space

Transwestern has arranged equity and debt financing for the acquisition and repositioning of a flex research and development facility in Tustin, Calif.

Transwestern has arranged equity and debt financing for the acquisition and repositioning of a flex research and development facility in Tustin, Calif.

14201 Franklin Ave. in Tustin, California

14201 Franklin Ave. in Tustin, California

The redevelopment of the 39,762-square-foot property at 14201 Franklin Ave. is scheduled for completion in early 2016.

Transwestern’s Robert Murphy, Gary Limjuco and Steven Orchard organized the financing on behalf of Harbor Associates LLC.

Transwestern sourced equity from a new discretionary fund representing several private investors. The non-recourse debt included a 60 percent loan-to-value ratio, a 3.5 percent interest-only rate and a four-year term. The financing structure exploits shifting dynamics to create above-market returns with a stabilized 8.3 percent yield on cost.

“Harbor saw potential in this asset that others missed because it requires a significant amount of due diligence,” said Murphy. “Harbor focuses on mid-sized, Class B or better office repositioning opportunities in Southern California, and this asset presented an attractive opportunity at a favorable price.”

The two-story building spreads across 2.3 acres, half of which is vacant land that will be converted into outdoor amenities and additional parking. Other improvements will include a new lobby, atriums, natural lighting, polished concrete floors and 14-foot exposed wood ceilings. The office redesign will cater to tenants seeking creative spaces, which are in high demand in Orange County.

“There is a significant supply and demand imbalance for creative space in Orange County, and owners of creative projects have seen incredible success, achieving rental premiums of 20 percent above traditional office rents,” Justin Loiacono, principal at Harbor Associates said in prepared remarks. “The Transwestern team presented us with a variety of capital solutions from both institutions and family offices, ultimately sourcing a partner that believed in our new platform and business plan for this asset.”

Located within 1 mile of Interstate 5, the 261 Toll Road and Jamboree Road, the facility provides easy access throughout Orange County and Southern California. Tustin Marketplace, a 1.6 million-square-foot outdoor shopping mall, and the 1 million-square-foot District at Tustin Legacy shopping mall are also situated in the property’s proximity.