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.
In the 800 S. Hope deal, R. Todd Doney, senior vice president at Cushman Realty Corp., represented DLJ and is also handling leasing of the building.
Big Cerritos deal
TA Associates Realty, a Boston-based institutional advisor, has bought the 978,000-square-foot Cerritos Industrial Park for more than $50 million.
San Francisco-based RREEF Funds sold the sprawling, 45-acre property, which has 54 buildings and sits at the northeast corner of Marquardt Avenue and Artesia Boulevard. The property is fully leased to a variety of warehousing, distribution and manufacturing operations.
CB Richard Ellis brokers Darla Longo, Steve Batcheller, Rick McGeagh and Jeff Morgan represented both parties in the transaction.
Westwood tower strengthens
The Center West office tower in Westwood has hit a new plateau in its occupancy level, 92 percent.
"This is the highest (occupancy) has been ever since the building was completed," said Kam Hekmat, the tower's owner and developer.
The 296,000-square-foot, 22-story tower at the corner of Wilshire Boulevard and Glendon Avenue opened in 1990, just as the real estate market crumbled. Five years ago, its occupancy stood at only 50 percent.
But occupancy has ratcheted upward since then. In the last 45 days alone, seven firms have leased a combined 52,000 square feet of space in the building. They are: Palomino Euro Bistro, Aurora Capital Partners, Merrill Lynch, Heidrick and Struggles, Fulwider Patton, Middle Fork Productions and Gores Technology.
Monthly per-square-foot rents for the office tenants are in the "high $3" range, which is at the upper end of the market, Hekmat said.
West L.A. leases
The 11-story office building on Olympic Boulevard, formerly known as the Executive Life Tower is getting two new tenants: Canon Communications LLC, which publishes trade publications for the medical products industry, and Psomas & Associates, a consulting firm specializing in land development, surveying and computer mapping.
With those two leases, the building is completed occupied, said Patricia Gilbert of Cushman Realty Corp., who handles leasing for the building.
Canon has signed an eight-year lease for 50,000 square feet and will receive top-of-building signage. The lease is for twice as much space as Canon currently occupies at the Santa Monica Business Park.
Psomas has leased 34,000 square feet the entire sixth floor and half the seventh also in a relocation from Santa Monica.
Raleigh Enterprises developed the 237,000-square-foot building located at 11444 W. Olympic Blvd. in West Los Angeles in 1984.
Leonard Nadler and Mark Robinson with Julien J. Studley Inc. negotiated the $11 million lease on behalf of Canon. Chris Holland of Westmac Commercial Brokerage Co. and Ralph Simmonds of Simmonds Realty Group represented Psomas in its $4 million, five-year lease.
Cushman's Gilbert and Jerry Hess represented the building owner, Roll Properties International.
Trammell Crow Co. is in escrow to buy the former Coast Federal Bank headquarters complex, which includes 375,000 square feet of space in six office buildings on 30.5 acres of property in West Hills.
Trammell Crow officials declined to reveal the purchase price until after escrow closes, which is expected to happen by year end.
Coast moved into the complex only four years ago, but was soon thereafter purchased by H.F. Ahmanson & Co., which was then bought by Washington Mutual Inc.
The buildings are part of a larger office campus that had been occupied by Hughes Missiles Systems, which pulled out in the early 1990s. All six buildings are currently vacant.
"We plan on remodeling the exterior of the buildings and re-leasing them as soon as we can," said Mark Leonard, principal and senior vice president with Trammell Crow. "It's a unique site and the market is strong, with very few vacancies."
Elizabeth Hayes can be reached at (323) 549-5225 ext. 229.
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