by Mark Mueller
Karma Automotive LLC is embracing a lease-to-own strategy, for its local real estate holdings, at least.
The Costa Mesa-based luxury carmaker last week completed the purchase of a big building in the Irvine Spectrum at 9950 Jeronimo Road for its new headquarters.
Karma paid a little under $56.3 million for the 262,463-square-foot building, or about $214 per square foot, according to Newport Beach-based Bixby Land Co., which sold the facility.
The carmaker struck a deal with Bixby in August to lease the same Irvine building. The deal for the entire building was among the largest office leases of last year (see related Commercial Leasing Guide special report, beginning on page 17).
The Spectrum location is intended to boost Karma’s presence in Orange County as the company prepares the rollout of its $130,000 Revero, a hybrid model sports car powered by electricity, gas and solar energy.
Karma is already OC’s biggest automaker based on employee count, with more than 500 workers reported here as of late last year. The new space would allow it to add about another 300 here.
The headquarters will have a host of creative-office features and hold what the carmaker calls a “Branded Experience Center” for Revero shoppers.
Karma announced the company-owned direct-sales center last year as part of a new distribution strategy that incorporates dealer agreements with eight U.S. and two Canadian dealers, including a second Southern California location in Pasadena.
The new headquarters, about a mile east of the San Diego (5) Freeway just off Bake Parkway, has been a source of intrigue among area real estate and automotive industry watchers for much of the past eight months.
Despite inking the lease with Bixby in August, Karma has yet to move into the new location. Last week, the space was empty, and a minimal amount of a multimillion-dollar interior renovation the tenant is planning had been done. There were no construction workers to be seen.
It’s rare for area leased buildings of that size to remain unused for extended periods by occupants, especially in a strong commercial real estate market with few large blocks of available space.
Signs at the site show the Long Beach office of general contractor Turelk is leading construction work at the building, which previously served as the U.S. headquarters of Kawasaki Motors Corp., a distributor of ATVs, motorcycles and personal watercraft.
Karma’s existing space in Costa Mesa, which it leases, is fully occupied and in use. Brokerage data show the 80,000-square-foot space will be available to new tenants this summer.
Karma’s taking its time to move into the new space appears to be in keeping with the credo of the company under new owner Wanxiang Group Corp., one of the largest auto parts makers in China.
“We aren’t in a private equity situation like the prior guys,” Karma Chief Revenue Officer Jim Taylor told the Business Journal in September. “We’ve got an owner that’s got patient capital.”
The automaker was known as Fisker Automotive and Technology Group LLC before Wanxiang bought it in a 2014 bankruptcy court auction for $149 million in cash.
Wanxiang also owns Fisker’s former lithium ion battery maker, A123 Systems Inc., which it got in 2013 for about $256 million.
Wanxiang is headed by Chinese entrepreneur Lu Guanqiu, whose fortune Forbes estimates at more than $5 billion.
Patience is also being shown in the rollout of the Revero sports car, which can hit 60 miles per hour in 5.4 seconds and has a top speed of 125 mph. The model is an update of the hybrid car built by Fisker about five years ago. It’s being built at a 556,000-square-foot plant in Moreno Valley.
A time frame on the first Revero deliveries to buyers hasn’t been announced, despite the company’s unveiling of the car in September.
“It’s just ‘when it’s ready,’” Taylor said at the time.
Karma’s purchase of the Jeronimo Road property marks the end of a profitable two-year ownership of the facility for Bixby Land, one of the area’s most prominent real estate operators and creative-office developers.
Bixby bought it in April 2015 from Kawasaki, which relocated its local offices to Foothill Ranch. The deal’s price was reported to be $44.2 million, about $12 million less than Karma’s paid for the building.
Bixby initially envisioned turning the site into a big speculative, creative-office development but switched courses when Karma took an interest as a tenant.
Around the time of its lease deal with Karma last year, Bixby sold a 4.7-acre parcel next to the building to Chapman University for a reported $10.5 million. The school’s new Harry and Diane Rinker Health Science Campus is just down the street.
Bixby’s still looking for similar opportunities in the area, although rising prices for OC-area buildings have made it more of a challenge, said Chief Executive Bill Halford.
“It’s harder to find deals here” than a year or two ago.”
Bixby’s recently been turning its attention to new markets, such as Portland, Ore. It has an 185,000-square-foot project in the works there, and is in escrow on another site in the city, which along with Seattle is one of the most attractive West Coast areas to buy property right now, according to Halford.
Gregg Haly and Jeff Carr with the Newport Beach office of CBRE Group Inc. represented Bixby in the sale to Karma Automotive. The carmaker was represented by Kevin Leonard of Healthwest Realty.