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OC Business Journal: Tustin Creative Offices Take Flight

by Mark Mueller

Construction has started on Orange County’s first substantial ground-up creative-office project in Tustin.

Flight, a nearly 40-acre office project that will hug the western edge of the Tustin Legacy development, took off last week near the intersection of Barranca Parkway and Red Hill Avenue. The groundbreaking takes place a week after the project’s development team—a partnership between the Irvine office of Lincoln Property Co. and Boston-based real estate private equity firm Alcion Ventures— closed on the purchase of the land for the first phase of construction.

The groundbreaking is the first step in a roughly 15-month first construction phase of eight offices and a stand-alone food hall and conference center that will total nearly 400,000 square feet.

The creative-style offices will be a mix of build-to-suit and for-lease buildings that the developers describe as “the highest quality, most efficient and most revolutionary office project that Southern California has ever seen.”

Flight will ultimately total about 870,000 square feet and 18 buildings constructed in multiple phases.

The project is “totally different from what we’ve seen before,” said Kurt Strasmann, senior managing director of the Newport Beach office of CBRE Group Inc., whose brokers are representing Flight’s developers.

Building design features will include exterior catwalks, elevators, balconies and porches in a departure from the central elevator-lobby core in most area office projects. Other planned features include a fitness center, amphitheater, conference facilities, outdoor meeting and gathering spaces, and a nearby park with 2.5 miles of walking trails.

Its Mess Hall Market will be a 12,000square-foot, chef-driven market food hall, the second of its type in the airport area by Lincoln Property. It opened the Trade Food Hall in May on Michelson Drive in Irvine as the city’s first upscale food court.

Prospective office tenants “are looking for projects that are loaded with amenities,” said Lincoln Property Executive Vice President Parke Miller. “We’re looking to create something that’s really special and unique for the area.”

$26M Land Deal

The Lincoln Property-Alcion partnership, operating as Flight Venture LLC, is paying the city just under $26 million for the 17.5 acres that will hold the first development phase, according to city documents filed late last year. The deal works out to a little under $1.5 million an acre.

About $6.5 million of the initial payment will go toward backbone infrastructure, including road and utility work.

Lincoln Property and Alcion signed off on a disposition and development agreement with the city in November but worked on finalizing issues pertaining to construction financing and other details before closing the deal, which was initially scheduled for March. Financing issues are now resolved.

“The developer has agreed on loan terms with its lenders,” which are New York-based iStar Inc. and a unit of Acore Capital in Los Angeles, according to city filings from late June.

New Team

It’s taken two development teams and the better part of a decade to get to this point in the construction process for offices at the city’s former Marine base.

The city initially selected Aliso Viejo’s Shea Properties as master developer for an 820-acre portion of Tustin Legacy that was to feature more traditional office development and other property types, but the Great Recession resulted in the end of that partnership in 2010 without any work getting started.

The city, after deciding to focus more on creative-office development, selected the local office of Lincoln Property as its preferred development partner for the office project in mid-2015 when it was known as Cornerstone.

The city had been negotiating with Lincoln Property—which later brought on Alcion as a development partner—on the size, scope and other details.

“It’s been a long process but well worth the wait,” said CBRE’s Strasmann. “The whole area will benefit tremendously from Flight.”

The city said the first phase will house over 1,700 employees.

The four largest of the first-phase buildings will be 90,000 square feet to 145,000 square feet, according to the project’s marketing materials.

Floors for the midrise buildings will be as large as 38,000 square feet, bigger than in traditional area office buildings. The other four offices in the phase are described as a minicampus designed for smaller users of 6,500 square feet to 13,250 square feet each.

A three-story parking garage with 1,158 parking spaces will accommodate tenants.

Changing Plans

The start of work comes as the city of Tustin revisits plans, uses, and product types for other undeveloped portions of its nearly 1,600-acre Tustin Legacy site, one of OC’s last big chunks of developable land.

Under current plans, the city has approvals to build 4,601 homes and apartment units— 3,270 of which are either already built or approved to be built—along with about 11.2 million square feet of commercial space, of which nearly 2.5 million square feet has been built or approved.

Under plans the city’s considering, residential entitlements would rise to 6,813 homes and apartment units, and commercial development would fall to 9.5 million square feet.

The incorporation of urban mixed-use and transit options are among the biggest changes to the proposed residential and commercial entitlements, which have been in various forms of review for a few years.

The goal is to “reposition the City’s remaining undeveloped lands in light of current and future market conditions in residential, office, and commercial development,” city filings on the proposed changes say, “changing demographics and consumer preferences in the Orange County market; and new opportunities to attract uses and create places that will benefit the greater Tustin community.”

City officials anticipate that Tustin Legacy will be completed in the next 10 to 20 years, depending on market conditions.