Manulife US REIT Cuts Value of Irvine Office Building

Manulife US REIT has lowered the value of a 19-story office building in Irvine ahead of a potential sale.

The Singapore-based real estate investment trust downgraded the value of the 536,000-square-foot tower at 3161 Michelson Drive to $256 million, from $292 million late last year, the Orange County Business Journal reported, citing a regulatory filing.

The Michelson tower, a mile from John Wayne Airport, was once among the priciest buildings in OC. Before the pandemic, it was valued at $345 million, or $645 per square foot.The most recent estimate represents a 26 percent decline from its peak value.

The $256 million valuation comes as Manulife considers selling its sole OC property.

If listed at that price, it would add to a series of discounted office sales during the era of remote work, higher interest rates and fewer financing options.

The Michelson tower is in the Park Place complex, near the 404 Freeway and Jamboree Road. It’s 83 percent occupied, down from 91 percent at the end of last year.

Tenants include Hyundai Capital, the leasing arm of the Fountain Valley automaker, which takes up 100,000 square feet. LA Fitness has renewed a lease for its corporate headquarters.

Manulife Financial, based in Toronto, bought the office building in 2012 for $277 million — then the priciest single office building sale in OC. Four years later, Manulife packaged the Irvine property among U.S. buildings in an initial public offering listed on the Singapore Exchange. As part of the IPO, the real estate investment trust or REIT bought the Michelson building from Manulife for $317.8 million, though it pegged its value at $328.6 million.

In July, Manulife US REIT said the total value of its properties dropped this year by close to 15 percent to $1.63 billion, the result of higher vacancy rates, according to the Wall Street Journal. It owns 11 high-end office buildings in Los Angeles, Sacramento, Atlanta, Jersey City and Washington, D.C.

The value of a 35-story, 392,000-square-foot tower owned by Manulife at 865 Figueroa Street in Downtown Los Angeles has been valued at $174 million — down from $315.2 million a year ago.

Manulife has hired a strategic advisor for a potential sale of several of its properties because of the sliding market, according to the Business Journal.

“We have seen healthy interest from a broad range of counterparties including local and international real estate developers, REITs and private equity players” Tripp Gantt, CEO for Manulife, said in February.

— Dana Bartholomew