It’s the largest office building to sell in the LAX submarket in more than a decade.
The Airport Spectrum, a 500,000-square-foot Class A office campus that sits at the entrance to Los Angeles International Airport, sold last week to West Covina’s Sunny Hills Management Co. Inc. for $61.3 million.
Sunny Hills paid the seller, Miracle Mile developer Decron Properties Corp., $125 a square foot for the two-building property at 5757 W. Century Blvd.
Decron acquired the building in 2000 for $20 million. It was less than 30 percent leased at the time, and Decron invested more than $6 million to renovate the façade, modernize the lobby and improve the common areas. That helped lure tenants that include UCLA, Expeditors International and the Transportation Security Administration.
It is now 75 percent leased, which is roughly 15 percentage points higher than the average among better properties in the long-struggling market, according to data from CoStar Group Inc.
The LAX market has performed so poorly that some see hotel conversions as the best use for office buildings. Corona del Mar’s Seaview Investors bought a 12-story office tower at 5933 W. Century last year for $10.8 million and hired Irvine firm R.D. Olson Construction to convert it into a 231-room Residence Inn by Marriott, which cost an additional $44.5 million.
Sunny Hills plans to continue operating Airport Spectrum as an office property and will ramp up efforts to lease the remaining space.
The $8 billion modernization of the airport influenced the firm’s decision to purchase, as did the potential that, as rents rise in Playa Vista and El Segundo, tenants will spill over into the LAX market, said Marc Renard of Cushman & Wakefield Inc., who along with Manfred Schaub and Chris Sinfield, represented the seller. The buyer was not represented in the sale.
Compared with the nearby El Segundo market, where offices are selling for upwards of $300 a square foot, the $125-a-square-foot price was seen as a deal, Renard said.
“The strength of the office market in Playa Vista and El Segundo is spilling over into Torrance and it will continue to move south, so a lot of people are betting on the revitalization of the Century Boulevard corridor,” he said.
Cerritos Steal
A struggling Cerritos office property changed hands earlier this month for $30.5 million.
Koll Co. of Irvine, in partnership with Miami’s Rialto Capital Management, bought the nine-story Cerritos Tower at 18000 Studebaker Road from Winthrop Realty Trust for $167 a square foot. The price was a steal compared with the average for the Mid-Cities market the property sits in, which is $186 a square foot, according to CoStar. It traded for less than it did in 2006, when Jamison Services Inc. bought the property for $49.3 million, or $268 a square foot. Jamison, amid a downturn-fueled disposition spree, sold it to Boston-based Winthrop in 2012 for an undisclosed amount.
The reason for the current discount is clear: the 184,200-square-foot Class A office tower is only 74 percent leased. Tenants include Premier Business Centers, Freemont College and Sun West Mortgage Co. And that rate, significantly lower than the 90 percent occupancy average in the submarket, according to CoStar, is actually an improvement.
Winthrop invested $1 million over the past 18 months to improve the property, which created more leasing activity, said Paul Jones of CBRE Group Inc., who represented the seller along with Kevin Shannon, Ken White and Blake Bokosky.
The sale is part of Winthrop’s plan to exit Southern California altogether, Jones said.
Koll was attracted to the property because it was below peak pricing, said Scott Meserve, executive vice president of the firm.
Koll and Rialto will fix it up further, reposition it and push rents, Jones said.
Average rent at the property is $2.18 a square foot a month, which is roughly in line with area averages.
Finally Open
Nearly a month after an explosion in the basement of Jamison’s 20-story office tower at 811 Wilshire Blvd. in downtown Los Angeles, the building has finally reopened.
City officials earlier this month gave roughly 550 workers the greenlight to enter the 337,100-square-foot Class A office building for the first time since the Aug. 20 explosion. Takami, an 11,000-square-foot Japanese restaurant on the building’s penthouse level, reopened its doors last week.
The cause of the blast is still under investigation. It is believed to have involved a Los Angeles Department of Water and Power electrical vault, but the exact reason for the explosion is unknown.
Jamison offered all tenants free office space at its numerous downtown towers during the month the building was closed, according to a spokesman for the firm.
The spokesman declined to comment on how much the damage and closure cost Jamison.
Staff reporter Hannah Miet can be reached at [email protected] or (323) 549-5225, ext. 228.
