November 19, 2007

South Coast Plaza Buildings Retrofitted To Be ‘Green’

Valeo Inks $100 Million Deal for College Housing; Mensinger To Head SunCal Multifamily

By Mark Mueller

A growing number of office projects going up in the county have been getting certified as environmentally friendly buildings. Now some of the area’s more prominent older buildings are going green.

The Offices of South Coast Plaza, the office division of C.J. Segerstrom & Sons LLC, just said it plans to get its three high-rise towers in Costa Mesa certified as green buildings under the Leadership in Energy and Environmental Design-Existing Building program.

The first building to be certified will be the 21-story Center Tower at 650 Town Center Drive. It’s expected to complete certification sometime in second quarter 2008.

It will be followed later in the year by the landlord’s most distinctive building, the César Pelli-designed Plaza Tower, as well as Park Tower.

C.J. Segerstrom & Sons is getting the buildings’ mechanical equipment and ventilation systems upgraded and certified, improving trash and water recycling and taking steps to reduce the use of electricity.

Tenants at the South Coast Plaza offices—including a number of larger national companies—are beginning to demand environmentally friendly upgrades when renewing their leases.

“This was a response to that demand,” said Andrew Stinson, marketing director for the Offices of South Coast Plaza.

How much the certification will end up costing the buildings’ owner is still being determined, said Nancy Miller, operations manager for the landlord. For new buildings, the hard costs of LEED certification can add up to 2% to the building’s total development costs, according to officials with Hines Interests LP of Houston.

The developer’s 2211 Michelson tower in Irvine, which opened earlier this year, was the first high-rise in the region to be certified. Hines said it can recoup those certification costs with a 1% rent premium, and tenants can in turn recoup that cost with increased workforce productivity and lower utility-related operating expenses that come with green buildings.

Valeo Venture

Valeo Cos., a Lake Forest-based builder of university housing and mixed-use projects, just signed a $100 million joint venture deal with Chicago’s Henderson Global Investors (North America) Inc.

The money is set to be used to develop faculty, staff and student housing at university and college campuses in the Western U.S.

The partnership will provide equity for university developments under a financial structure that allows the housing projects to be off-balance sheet and off-credit for the university, according to Conrad Sick, Valeo president.

“With this arrangement, rating organizations such as Moody’s and S&P can see that the project risk is with the developer, not with the school,” Sick said in a statement.

Valeo’s executives have planned more than 5,000 university housing and apartment units in the past decade, the majority of which already have been built.

Local projects the company’s executives have worked on include the University Gables and University Heights faculty and staff housing for California State University Fullerton, and University of California, Irvine’s University Hills faculty and staff housing.

More Muller

In last week’s column, I wrote about changes to a few office buildings just bought by Laguna Hills-based Muller Co.

A big change also is happening at one off the developer’s other properties, the so-called “Taj Mahal” building in Laguna Hills. Muller is looking to sell the 79,539-square-foot building, next to Saddleback Memorial Medical Center.

The three-story building is about 25% leased to medical tenants. Plans are to market the rest of the space for medical uses, too. Up to 24,000 square feet of medical or surgery space could be built at the site.

Ryan Gallagher and Kelly Rohfeld of Grubb & Ellis Co.’s Newport Beach office have been retained as advisers for the sale of building.

RESIDENTIAL

Steve Mensinger, formerly the president of Costa Mesa’s Arnel Management Co., has joined SunCal Cos. as the president of the master developer’s new multifamily division.

He will lead development of upscale apartments within SunCal’s existing land holdings, and also will buy apartment complexes.

“Our goal is to build what we can and acquire where we should,” he said.

The division could grow to 20,000 to 40,000 apartment units within the next decade, he said.

Mensinger spent two decades with Arnel & Affiliates, the real estate firm owned by former U.S. Ambassador George Argyros. Most recently, he was the president of Arnel Management, the company’s apartment division.

This is the second new line of business announced by SunCal in as many months. In October, I wrote about SunCal-backed homebuilder Mosaic Homes, which will build on the developer’s land in Southern and Northern California