San Diego’s largest office landlord sells Symphony Towers for cheap

The biggest office landlord in the region has offloaded one of downtown San Diego’s most recognizable buildings at a bargain-basement price in a transaction that will have a ripple effect on property values around town.

On Tuesday, Irvine Company sold the 34-story office tower at 750 B St. for $45.7 million to Orange County-based Formosa Ltd., according to property records.

Irvine Company purchased the 546,092-square-foot building for $134.3 million in March 2003.

“This acquisition provides an extraordinary opportunity for us to establish a foothold in one of San Diego’s premier office locations,” Formosa CEO and Founder Joe C. Wen said in a statement. “This is one of the most dynamic buildings in the market and is poised for continued success with the much-anticipated reopening of the San Diego Symphony later this year.”

At the time of its sale, Symphony Towers was 75.2 percent leased, according to data from real estate tracker CoStar. The trade, valued at around $84 per square foot, lowers substantially the value of nearby office towers within downtown’s depressed B Street corridor that are similarly plagued by low occupancy.

Opened in 1989, Symphony Towers was built as part of a mixed-use complex in concert with the Marriott-owned hotel fronting A Street and a five-level parking garage. The towers flank Symphony Hall, now known as the Jacobs Music Center, which is owned by the San Diego Symphony Orchestra. A concourse above the performance venue and parking garage connects the properties.

Standing 499 feet tall, Symphony Towers was the tallest building in town when it was built until the 500-foot-tall One America Plaza, also owned by Irvine Company, opened a few years later.

The building’s largest tenant is the 4th District Court of Appeal, which leases 63,000 square feet, according to CoStar. Other tenants include the law firm Seltzer Caplan McMahon Vitek, the San Diego Tourism Authority and the University Club, a members-only business group.

The club, located atop the building, extended its lease and will operate Knead Artisan Bakery cafe on the ground floor, said Scott Moffatt, who runs the San Diego region for the building’s new property management company, Lincoln Property Company.

“(Formosa) looks at this as a premier asset in San Diego, (thanks to) Irvine Company’s ownership and stewardship for 20 years,” Moffatt said. “They’ve done a fantastic job, not just with managing and owning the building, but there’s also the fact that the symphony is there, the University Club is there and Knead.”

Wen, a businessman and philanthropist, plans to continue to run the building with the same attention to detail, he said.

The Irvine-to-Formosa transaction is a sign of a downtown office real estate market in decline, with building owners forced to confront what to do with older properties that need new dollars to fill sizable vacancies, said Richard Gonor, an executive with Jones Lange LaSalle who is an expert in the field.

The sale, one of only a few in the market, will set a new baseline, he said.

“Everybody in the market is looking for data points right now because there have been so few office property sales of this nature, and it will certainly impact the value of properties in the downtown market,” Gonor said.

The change in ownership also has the potential to affect rents, making the leasing environment all the more challenging for properties along B Street that are competing for a limited pool of potential tenants.

“For a new buyer coming in, there’s a great opportunity to acquire one of the best buildings in downtown San Diego at a lower basis, and be able to offer terms to tenants that might be more flexible than what other owners in the market are able to do,” Gonor said.

The sale is also unique in that Irvine Company is a private real estate company known for holding on to top-tier assets in Southern California.

In San Diego, Irvine Company owns 62 office properties totaling 8.1 million square feet of space, making it the largest office landlord in town, said Joshua Ohl, who is the senior director of market analytics for CoStar.

Irvine Company’s exit from Symphony Towers suggests that the long-term property owner may be reconsidering its approach to its downtown portfolio, particularly as the center of gravity for San Diego’s office market shifts west toward Holland Partner Group’s West project. Irvine Company also owns Wells Fargo Plaza on B Street, and 101 West Broadway and 225 Broadway near Horton Plaza.

“As it relates to downtown, we’ve seen tenants continue to prioritize the west side of downtown and the Columbia District as their preferred location, not only because of the age of the properties, but also because of the proximity to amenities and food and beverage,” Gonor said. “It’s also typically newer development and there are less homeless people.”

Irvine Company said at the time it listed Symphony Towers for sale that it intends to maintain a sizable footprint in San Diego.

“We are actively planning to reinvest in the greater San Diego metropolitan area and anticipate growth for the foreseeable future,” the company said in a statement.

Adam Edwards, Justin Shepherd and Bailey Bland of Eastdil Secured represented Irvine Company in the transaction.