Owners Land Ground Beneath Office Properties

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Owners Land Ground Beneath Office Properties
Towering Deal: Two California Plaza.

The owners of two iconic office towers on downtown’s Bunker Hill now own the land on which they sit.

In deals that closed late last month, Beacon Capital Partners purchased the land beneath One California Plaza for $33.4 million, and CIM Group picked up the parcel under Two California Plaza for $70 million, according to public records.

The parcels, part of a six-acre plot, were sold by CRA/LA, the former Community Redevelopment Agency for the city of Los Angeles. The entity, dismantled in 2012 amid state cutbacks ordered by Gov. Jerry Brown, began selling off its assets last year, assisted by Cushman & Wakefield’s Marc Renard, Manfred Schaub, and Jimmy Chai.

The portfolio of 50 assets included odd slices of land such as a 556-square-foot parcel in Pico-Union and a 25-square-foot strip of land in the Hermon neighborhood north of downtown. Prestigious sites were part of the portfolio as well, such as the land beneath downtown’s Colburn School, the ArcLight Hollywood parking lot, and the land occupied by One and Two Cal Plaza.

The sleek blue towers were constructed on land owned by the CRA at a time when Bunker Hill was a nascent office market. One California Plaza, built in 1985, has 1 million square feet on 42 floors. Tenants include Aecom, Morgan Lewis, Nixon Peabody, and Bank of the West. Two California Plaza was built in 1992 and has 1.3 million square feet on 52 stories. Merrill Lynch, Reliance Steel, and BlackRock are among the companies on its tenant roster.

Beacon and CIM had 66-year leases on the buildings, paying an annual rent of $3.2 million and the right of first refusal to acquire the land if it came available. Beacon picked up its building for $144.5 million in 2013, and CIM swept in the following year to buy the neighboring tower for roughly $297.7 million.

Two California Tenant

Things got even rosier for CIM at Two Cal Plaza last week.

The company announced that City National Bank has signed a long-term lease there for 11 floors totaling about 300,000 square feet.

According to CIM, the bank will be an anchor tenant whose agreement includes prominent building signage and the rebranding of the property as CityNational@2Cal. Renovations are planned to begin next year, with occupancy in 2018.

The lease is the building’s second major transaction in the past year. In December 2015, law firm Munger Tolles & Olson signed a lease for 150,500 square feet on five floors and part of a sixth, CIM said. The firm is expected to move in early next year.

Measure S Study

An anti-development measure on the March ballot could cost Los Angeles 12,000 jobs a year and deprive the city of thousands of additional housing units if it passes, according to a study released by initiative opponents last week.

Measure S, formerly known as the Neighborhood Integrity Initiative, would establish a two-year moratorium and other limits on major housing projects in the city.

The initiative was placed on the ballot by a coalition of neighborhood activists with financing from the AIDS Healthcare Foundation. The foundation opposes developer Crescent Heights’ Palladium towers project planned next to its Hollywood headquarters.

Measure S would place a two-year moratorium on most projects requiring a zoning plan amendment and, after the moratorium ends, make the approval process for these projects more difficult. It would also require the city to update its general zoning plans.

The study, conducted by L.A. economic consulting firm Beacon Economics for the labor, business, and nonprofit coalition that’s opposing the measure, primarily looks at the impact of the two-year moratorium. Study co-authors Christopher Thornberg and Robert Kleinhenz found the moratorium would result in a loss of 12,000 jobs a year, or 24,000 jobs over the two years, about 15 percent of the total number of construction jobs in the city.

That in turn would result in $642 million in lost wages and $1.9 billion in lost economic output, the study says. With projects on hold or abandoned, the city would forgo more than $70 million a year in sales, property, hotel bed, and other taxes.

Measure S proponents said the study could not be considered objective.

“This is a study manufactured by Beacon Economics, the firm that is being paid to fight this measure, and it’s full of sky-is-falling claims,” Measure S campaign director Jill Stewart said. “We expect that if the measure passes, there will be a healthier economy. Good planning leads to vibrant neighborhoods.”

Staff reporter Daina Beth Solomon can be reached at [email protected] or (323) 556-8337. Howard Fine and Paul Eakins contributed to this column.

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