The Paley Center for Media property sold last week for the highest off-Rodeo Drive price paid for a Beverly Hills retail property since 2007.
New York private real estate investment firm Jenel Management Corp. purchased the 26,500-square-foot property at 461-69 N. Beverly Drive for nearly $47.3 million, about $1,782 a square foot.
The seller in the all-cash transaction was a group of seven trusts representing the families of business partners who purchased the property together in the 1920s to use as headquarters for a lumber company. Bank of America had a long-term ground lease for the property, which it in turn sublet to the Paley Center in 1995. L.A. architect Richard Meier, best known for his work on the Getty Center, designed the Paley building.
John Bertram of Savills Studley, who represented the buyer in the deal, said the bank’s rent – and by extension the Paley Center’s sublease – is tied to the gold standard, causing rental rates to fluctuate from year to year.
“Every year the rent gets readjusted based on the price of gold, so underlying rent was low relative to the market,” he said.
With potential for rental growth, Bertram added that he wouldn’t be surprised to see the property convert to high-end retail use with steeper rents once the long-term ground lease expires in nine years.
“I think Paley’s intention is to stay in the building, and the buyer’s intention is to hold the property as a passive real estate investment,” he said. “But when Paley leaves, it’s going to be converted to high-end retail with much higher rents.”
Chris Holland and Patrick Sheekey of Coldwell Banker Commercial Westmac represented the seller in the deal.
Baby Steps
Premium infant products company Ergo Baby Inc. will move its downtown L.A. headquarters early next year, though only baby steps away.
The company, which manufactures and sells baby carriers and other accessories, signed a seven-year lease for about 16,400 square feet at 617 W. Seventh St., just three blocks away from its existing headquarters at 888 Figueroa St. The move will be an expansion for the company, which previously occupied only about 7,000 square feet.
Financial terms of the deal were not disclosed, though space in the 12-story Class A office building is being marketed for $3 a square foot a month, according to real estate data provider CoStar Group Inc. At that rate, a seven-year lease for 16,400 square feet would be valued at about $4.1 million.
John Zanetos of CBRE Group Inc., who represented San Francisco landlord Swig Co., said Ergo Baby was attracted by the building’s exposed brick walls and concrete floors.
“They liked the fact that they could get into a historic office building and have creative office space in a building with infrastructure to support the needs of the modern office tenant,” he said.
Ergo Baby joins at least three other tenants to sign leases at the building since early October. Last month, forensic accounting consultant HSNO, transportation planning and design firm Alta Planning + Design and non-profit Center for Sustainable Energy each signed leases for about 2,200 square feet. Together, the leases bring the occupancy rate in the 218,000-square-foot building up to nearly 90 percent.
Chris Penrose and Mark O’Brien of CBRE also represented the landlord in the deal. Andrew Lustgarten and Sonya Schmidt of Savills Studley represented the tenant.
Koreatown Sale
Apartment buildings in Koreatown continue to be a popular buy for investors.
Murano Apartments, a 46-unit multifamily property at 342-350 S. Catalina St., was sold recently to Beverly Hills real estate company SM Management for $11.6 million, or about $252,000 a unit. The seller, San Mateo investment group TDA Inc., had purchased the building for $5.1 million in 2002, according to CoStar. The property was entirely occupied at the time of sale.
Asking rents for the building’s 31 one-bedroom units and 15 two-bedroom units range from $1,123 a unit to $1,675.
Brent Sprenkle, a partner in the Westwood office for Berkadia, a joint venture of Berkshire Hathaway and Leucadia National Corp., represented both buyer and seller in the deal. He said SM was willing to pay a big price for the 25-year-old building because it is confident the property can be repositioned.
“They see really heavy demand for rentals and a constrained market, and they feel strongly that they can raise rents in that building significantly,” he said. “They also own a lot of other assets in the area, so they were familiar with the market.”
Multifamily vacancy in the Central Los Angeles submarket, where Koreatown falls, was 6.5 percent in the third quarter, up from 6 percent in the same period a year earlier, according to data provided by Berkadia. Still, rents have continued to climb, rising 6.9 percent year over year in the third quarter to $3,058 a month.
Staff reporter Bethany Firnhaber can be reached at [email protected] or (323) 549-5225, ext. 235.
