El Segundo Company’s REIT Promises Stability

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Griffin Capital, a private El Segundo real estate investment company, is starting a $100 million venture that aims to offer a stable investment in the down economy a public unlisted real estate investment trust.

These special investment entities are vastly different from the standard REITs traded on stock exchanges. Public unlisted REITs have a share price that is set by their sponsor and does not fluctuate. They also offer dividends that are typically higher than their public counterparts.

Griffin President Kevin Shields said it makes sense to start his venture now because investors will be attracted to the stability of a set share price. The new REIT will have a target dividend of 6.75 percent and a share price of $10.

The downside is that is the REITs are not as liquid. With this new venture, only up to 5 percent of shareholders will be able to redeem their investment in any given year.

“The trade-off for the lack of liquidity is a higher dividend yield,” Shields said. “The product is perceived as being generally more stable because the share price doesn’t change. So it continues to attract capital.”

Later this month, Griffin will file with the U.S. Securities and Exchange Commission to begin the registration process for the venture. Griffin Capital is investing $20 million and aims to raise a total of $100 million to buy single-tenant office and industrial properties.

“We see just phenomenal opportunities in the single-tenant sector,” Griffin said. “For an individual retail investor, buying this kind of asset class offers a very competitive risk-adjusted return.”

Public unlisted REITs, which also go by the name “untraded” REITs, among several others, became a popular investment vehicle during the real estate boom. About $12.5 billion was raised through them in 2007. Last year, the figure was $9.5 billion, which was still more than the $6 billion to $8 billion raised annually in prior years, Shields said.

While the market is expected to contract again this year, Shields believes the investment is perfect for the down economy. “What a great environment for us to bring about a low volatility product,” he said.

Public unlisted REITs exist for a set period of time before either going public, being liquidated or merging. Shields said his venture will operate for seven to 10 years, with the type of its closure undetermined.

The new investment entity will be separate from Griffin Capital.


NoHo Glow

ASI Entertainment Inc., a Glendale television market research firm, is relocating its headquarters to the growing North Hollywood commercial area.

The company, which also is consolidating another office in North Hollywood, will move into its new digs at 12020 Chandler Blvd. in August after signing a 10-year lease for 20,916 square feet of space.

The January transaction with building owner Pacific Coast Capital Partners LLC is valued at roughly $6.5 million with an undisclosed lease rate.

“It is definitely a market rate deal for this building and location,” said Senior Vice President Nico Vilgiate, a CB Richard Ellis Group Inc. senior vice president, who represented Pacific Coast Capital. “We are very comfortable with the economics.”

Pacific Coast, an El Segundo real estate finance and investment management firm, is remodeling the vacant office building. Jennifer Diaz, a Pacific Coast fund manager, said the company had planned to convert the property into residences but switched plans once the real estate downturn occurred.

“We are definitely excited about having ASI and bringing life back into this building as soon as renovations are done,” Diaz said.

The renovated property will be ready for occupancy in April. Work began in October and the building’s interiors have been gutted. Upgrades include revamped elevators, common areas and restrooms. ASI’s space will include a screening room, where it can conduct focus group tests. It is an improvement over the company’s old space.

Steven Seinfeld of CresaPartners represented ASI. John Murray of CB Richard Ellis also represented the landlord.


Industry Veteran

Dick Dunn celebrated 60 years as a commercial real estate broker in January.

Dunn, 82, co-founded Charles Dunn Co. in 1949 with his brother and father. The family sold the business in 1995, but he stayed on until 2006 when he left to join Dunn Property Group Inc., an L.A. commercial real estate brokerage firm founded by his nephew.

Dunn said that he doesn’t plan to slow down despite the real estate bust, which he said is the worst he has even seen. “There is kind of a fear in the market,” he said. “Fear to do anything to make an offer.”

One reason he might not be retiring? In the last year he’s worked on deals valued at a total of $100 million.


Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.

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