PENTHOUSE—Lots of Room at the Top

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vacancies hard to fill at Pricey westside penthouse suites

Talk about feeling like a kid in a candy store.

With the Ronald Reagan Presidential Foundation leaving Fox Plaza in Century City at the end of the year, three of the four most coveted penthouse offices in the Westside office market are on the market.

The views! The prestige! The cost!

If you want to set up shop on the top floor of Fox Plaza, at 10100 Santa Monica Blvd., also in Century City, or Center West in Westwood, you’d better be prepared to pay and you’d better carry some name recognition.

An ideal penthouse tenant, most agree, is someone with more money than God and an ego on a par with Donald Trump’s. That’s the person or company who has to know your space is on the market.

“The penthouse is obviously a unique space and we recognize it might take some time to find the ideal tenant,” said Jennifer Smith, spokeswoman for The Irvine Co., owner of Fox Plaza.

She said interest in the penthouse has been steady, but no deal is imminent. The Reagan Foundation has rights to the space through the end of the year.

“You try to appeal to an individual or group that is motivated by the quality of a building,” said Neil Resnick, a senior vice president at Grubb & Ellis Co. “I don’t think (the penthouse) has any clout. It has cachet for someone who likes to say, ‘I’m at the top of the building.'”

That will be more certainly the case with Center West and Fox Plaza than at 10100 Santa Monica Blvd, which while a Class-A property is considered a hair less prestigious.

The difference is evident in the asking rates.

Todd Later, director of marketing for Hines Interests LP, which developed, manages and leases the building, said he’s seeking $5 per foot for his penthouse. Fox Plaza reportedly is being shopped at $6 per foot.

The average asking rent for a Westside office is about $3.14 per foot per month.

Center West President Kambiz Hekmat has been trying for 11 years to fill the 15,500 square feet on the top of his building and reportedly is asking just south of $6 per foot. The space has 15-foot ceilings, 10-foot windows and a panoramic view of the L.A. basin.


Emptiness as a virtue

Some real estate sources believe Hekmat’s happy leaving the un-built floor empty.

“Looking at the track record of Kam’s building, and the fact the top floor has been empty for more than a decade, he probably does that on purpose,” said Robert Chavez, president of The Staubach Co. “He prices it above the market so he can escalate his price structure throughout the rest of the building.

“Good for him because he can get away with it.”

Hekmat said such suggestions are untrue.

“We do want to rent it, but we want to rent it to the right person,” he said.

The right person has almost been several people: Eli Broad, Ron Burkle, even Hekmat himself, according to some Westside sources. Hekmat said he has rented it out a handful of times for location shoots and premiere parties, but he said such use is not something he wants to perpetuate.

Hekmat’s space is said to be under negotiation right now, but he wouldn’t disclose the potential tenant or the status of the deal. He is content to negotiate until he gets his price from his choice of tenant.

“You don’t sell as many Rolls Royces as you sell Chevys and Cadillacs,” he said. “It takes a certain type of user for the crown of your building.”

Hekmat took the same tack when he was looking for a restaurant on the ground floor of the building. He turned away several interested folks and eventually landed Palomino.

“Now everyone calls me smart, but before they called me stupid,” he said. “It’s added to the value of the building. I think it has added to (Westwood) Village altogether.”


Prestige works both ways

Later is looking for the same high-profile tenant as the other two building-owners. That is, someone who needs the premier space in a building, is security conscious and enjoys the exclusivity of a private floor. He said Hines is considering providing an elevator with nonstop service to the penthouse.

The stalled economy and slow leasing activity around Los Angeles might have an effect on how quickly landlords find the right tenant. Later said the prospect pool definitely is thinner than a year ago, but patience can be rewarded with rents 15 percent to 20 percent higher than the rest of the building.

“Whoever’s making the judgment on leasing needs to step back and look at it in a different way,” he said. “You have to evaluate, ‘Am I prepared to incur six months of downtime to get a premium rate?'”

Gary Weiss, managing director at Credit Suisse First Boston Realty, said high-end penthouse spaces are immune to market conditions.

“If you got enough money for the rent in the Fox Plaza penthouse, you don’t care what the rest of the market is doing,” Weiss said.

In this environment, however, competition has picked up among the landlords trying to fill these prime spots. The Irvine Co. has been running three-quarter-page ads in full color in a local newspaper with a simple yet direct statement that implies the significance of its penthouse vacancy:

“For the first time in over a decade the Penthouse is for lease.”

A couple of blocks away at 10100 Santa Monica, Later has his own way of getting out the word.

“Our approach has always been much more of a direct marketing piece directed to our target audience, which is the real estate brokerage community,” he said. “Secondarily, we target contractors, architects and real estate attorneys, people who know who’s looking for space.”

Later has been gutting and cleaning up the penthouse at 10100 since Princess Cruises left in March to relocate in Valencia.

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