Distressed Class-A Office Tower, 2600 Michelson, Trades for $70 Million in Irvine, Calif.

Dune Real Estate Partners and Ocean West Capital Partners have acquired 2600 Michelson, a 307,662 sq. ft. 16-story, Class-A office building located in the Airport Area submarket of Irvine, Calif. for approximately $70 million. At approximately $228 per sq. ft., the purchase price compares with a peak price of nearly $500 per sq. ft. prior to the Great Recession.

The structured transaction involved cooperation from the previous owner, receiver, special servicer and mezzanine lender. The focus of the new ownership now turns to executing a comprehensive leasing plan.

“We’ve seen early signs of improvement in the Orange County office market and believe there is significant value in its long-term fundamentals,” says Russell Gimelstob of Dune Real Estate Partners. “The structured nature of this transaction highlights the team’s ability to capitalize on opportunities at the intersection of the real estate and capital markets.”

The office tower’s contiguous upper-floor vacancies, available building-top signage, and 52% occupancy rate — compared to a peak rate of 95% in 2007 — present attractive leasing and repositioning opportunities in a recovering market, emphasizes Troy Miller of Ocean West. “We are confident that the combination of Dune’s substantial capital markets expertise and Ocean West’s prior experience operating and leasing this property will drive value for this investment.”

The Dune Real Estate Funds were launched in 2005 to make opportunistic investments in a broad range of real estate-related assets, portfolios, joint ventures and operating companies worldwide. The funds, which are managed by Dune Real Estate Partners LP, have more than $1.5 billion of equity under management and generally target distressed opportunities, underperforming and undervalued assets and portfolios, and value creation opportunities.

Ocean West Capital Partners, based in Santa Monica, is focused on acquiring and operating office and multifamily properties in primary California markets. Since its launch in early 2010, Ocean West has acquired $175 million of assets and manages 1 million sq. ft. of commercial space.

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