Los Angeles Unified School District is close to announcing that it will buy the 928,000-square-foot building at 333 S. Beaudry St. for an estimated $75 million, consolidating its headquarters at the site and despite the hefty price tag saving a ton of cash in the process.
A source close to the school district’s deliberations said the building has been selected from a list of five finalists and soon will be approved, “subject to the attorneys having a brawl.” A decision is due to be announced at the end of the month.
The deal for the South Beaudry Street building pencils out to about $81 per foot, far less than the alternative of spending $180 per square foot to build a new headquarters in land-scarce downtown, the source said. Considering that the district wants to consolidate 800,500 square feet of operations at the new headquarters, new construction could have cost around $144 million.
Beaudry I Investors LLC, an investment group based in New York, owns the building.
If the deal goes through as expected, the district would consolidate five operations at the building that is now home to Bank of America. The operations targeted for consolidation are district headquarters at 450 N. Grand Ave., the Third Street Annex at 1320 W. Third St., the Interim Business Center at 355 S. Grand Ave., the Knudsen Building at 315 E. 21st St. and San Pedro Street at 1425 S. San Pedro St.
Scot Graham, the school district’s real estate director, said the administration made a recommendation on where to locate the new headquarters at a closed session of the school board on April 2. Graham declined to say what that recommendation was.
School district officials and school board members initially had fears about the South Beaudry Street property because it is mere blocks from the infamous Belmont Learning Center. The school board voted in January 2000 to stop construction on its one-time “school of the future” and now board members and Superintendent Roy Romer are pondering what to do with the structure that sits atop a potentially volatile bed of methane and hydrogen sulfide.
The South Beaudry Street building carries none of the problems that plague Belmont because it was not built on an oil field, according to a source familiar with the negotiations among school board members, administrators and the building’s ownership.
“Every one of the buildings we’re looking at will be positively, absolutely, thoroughly investigated,” he said.
The school district has to move out of 450 N. Grand Ave. by March of next year to make way for a new high school. Graham said the school district also wants to get out of the KPMG building at 355 S. Grand Ave. quickly because it’s paying $14 million this year in rent to the building’s owner, MaguirePartners.
Once the school district vacates its administrative buildings, its plan is to convert those buildings into schools.
Setting Sun?
Another Japanese investment company is looking to sell property in downtown Los Angeles.
On the heels of news that Nippon Life Insurance Co. of America wants out of its partnership with Equitable Life Assurance Society of the United States at Union Bank Plaza, comes word that Shuwa Corp. is looking to sell its largely undeveloped property at Ninth and Flower streets.
Mark Tarczynski, an investment property specialist with CB Richard Ellis Inc. who is marketing the property for Shuwa, said the 7.2-acre property is composed of three parcels bounded by Eighth and Ninth streets and Flower and Hope streets, south of Macy’s Plaza.
Shuwa has owned the property for about a dozen years, Tarczynski. said.
“We’ve narrowed down the list (of potential buyers) to a small group of national and regional developers,” he noted.
All of the potential buyers are planning to develop the vacant portion of the property with a mixed-use structure that would feature housing above street-level retail.
Tarczynski would not reveal the asking price, but a source familiar with the area said the land could go for $130 per square foot, which would add up to $40.8 million for the land.
Tarczynski said Shuwa has been divesting its American portfolio for some time.
Hollywood Estimates Revised
After initially declining to comment on the status of its progress at the colossal Hollywood & Highland development, TrizecHahn Corp. issued a news release on the matter.
In the release, the Canadian developer revealed that the cost of its 645,000-square-foot project, which includes the new home of the Academy Awards, has ballooned to $615 million, a 63 percent increase over its pre-construction estimate of $385 million. Helping the company to cover that soaring price are $100 million in contributions from the city of Los Angeles and construction loans totaling $248 million.
TrizecHahn officials also revealed in the statement that nearly 80 percent of the project’s 425,000 square feet of retail space has been pre-leased.
Real estate brokers, developers and construction contractors said that TrizecHahn has gotten in so far over its head that it is offering sweetheart lease deals that include 100 percent construction loans for tenant improvements.
Lee Wagman, president of TrizecHahn Development Corp., said that the leasing status of the project is exactly where the company wanted it to be at this point, and disputed the reports that excessive incentives are being offered to lure tenants.
“The deals that we’ve made here are no more attractive than we’ve had to give traditionally in our retail developments,” Wagman said. “We are so thrilled with the way this has evolved.”
Since TrizecHahn introduced the Hollywood & Highland project in 1998, sources said, changes in approach and construction timetables to meet the planned November 2001 opening date have consistently pushed costs higher.
Wagman acknowledged the cost overruns, but said the developer should be lauded for sticking with the project and continuing to rack up costs with the goal of producing a unique mixed-use landmark.
Staff reporter Christopher Keough can be reached at (323) 549-5225 ext. 235 or at [email protected].
