Harbor Associates Sells SoCal Office Primed for Resi Conversion for $19M

An Arizona-based homebuilder has acquired a vacant office property in Orange County, Calif., already entitled for residential conversion. 

Meritage Homes paid $19.2 million for 2020 East First Street, a 111,483-square-foot office in Santa Ana, Commercial Observer can first report. CBRE’s Greg Sullivan and Anthony DeLorenzo represented seller Harbor Associates in the deal. 

Harbor acquired the 1980s-built property for about $13.3 million in 2018, according to property records. Yet the effects of the pandemic on office usage hit Southern California hard — office vacancy in Orange County in the first quarter of this year was still 15.3 percent, per CBRE — and Harbor apparently saw the writing on the wall. The investment firm last year began working with the city of Santa Ana to re-entitle the office for residential conversion, which was approved last quarter.

Meritage plans to convert the property into 86 townhomes, with a mix of two-, three- and four-bedroom units, plus live/work units. A timeline for construction on the project was not immediately clear. The sale price is notably less, in relative terms, than another recent office trade in Santa Ana. The Orange County Transportation Authority last fall paid $54.5 million for a 220,500-square-foot office at 2677 North Main Street, despite being located less than 3 miles northwest of Meritage Homes’ new project.

The re-entitlement and sale of 2020 East First Street isn’t the first conversion rodeo for Harbor, which focuses on acquiring, renovating/re-entitling, and selling underperforming assets.

In 2023, Harbor sold a former 292,540-square-foot office tower in Los Angeles’ San Pedro neighborhood, to investment firm Urban Stearns for about $28.5 million. Harbor had acquired approvals to convert the building into 228 apartments that same year. It’s also “finishing up the final touches” on converting a 119,000-square-foot former office and research and development complex in Agoura Hills into lab space.

“Our recent adaptive reuse business plans are reflective of markets that have an excess supply of office inventory, but are dramatically undersupplied for housing, industrial and life science uses,” Paul Miszkowicz, Harbor principal, said in a statement.  “We anticipate more change in the built environment over the next 10 years than in the previous 30 years combined, and are prepared to meet the needs of our local communities head on.”

Nick Trombola can be reached at [email protected].