Property values are slowly but steadily rising downtown, as demonstrated by two office tower sales that are bringing profits to the sellers. But despite the upward trend, neither sales price is anywhere near the replacement cost.

San Diego-based Shidler Group sold the 801 Tower on Figueroa Street for more than $87 million to Fifth Street Properties a joint venture between the California Public Employees Retirement System and downtown-based CommonWealth Partners, which was founded two years ago by several senior executives from Maguire Thomas Partners.

The purchase price is less than half the original construction cost.

In the other downtown deal, a group of investors represented by Alan C. Fox of Sherman Oaks is buying the 235,000-square-foot office building at 800 S. Hope St., which was built in 1986 as the corporate headquarters for the Bullocks department store chain.

Investment banking firm Donaldson Lufkin & Jenrette acquired the eight-story building for about $6 million after Federated Department Stores Inc. bought the Bullocks chain several years ago. The building has stood vacant ever since, but Fox said telecommunications firms are very interested in leasing space there.

He said the total cost of acquiring the building and making common-area improvements will amount to about $20 million about half the replacement cost. He expects escrow to close in the first quarter of next year.

This will be the first foray into downtown for the Fox-led group, following investments in Denver and Orange County. "We like the trend of values downtown," Fox said.

Shidler Group apparently isn't as bullish on downtown, deciding to unload the 24-story tower on the southern end of Figueroa. It had picked up the 801 Tower as part of a larger, $265 million portfolio that included the Pasadena Hilton. That portfolio was sold by an Indonesia-based investment group.

The 435,000-square-foot tower is just under 90 percent leased with law and insurance firms, such as Graham & James and Chubb Group of Insurance Cos., as well as Mitsubishi Bank.

Croft said the building is an "extremely high-quality asset" that's also well situated.

"We believe that end of Figueroa will do well in the intermediate term with Staples Center," said Michael Croft, CommonWealth's chief executive. "We'll have a good return while the area is upgrading."

The Calpers-Commonwealth partnership also co-invested in the Trillium office building in Warner Center and the ITT building in Valencia.

Marc Renard at Cushman & Wakefield Inc. brokered the deal for the seller. CommonWealth was represented in-house by Croft and Chief Investment Officer Brett Munger.


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