Tishman Speyer Properties, the new owner of MGM Plaza in Santa Monica, is letting a major tenant walk away from a lease estimated to be worth $17 million.
The decision will free up 150,000 square feet of office space at MGM Plaza as of Nov. 30, under a deal in which Tishman Speyer released longtime tenant Aurora Insurance Co. from its obligations on the remaining four years of its lease.
Officials at Tishman Speyer were not available for comment.
Brokers called the situation an indication of how well the market for Class-A office space is doing, and how confident property owners are that it will continue.
At this point there are no new tenants lined up to replace Aurora Insurance, said broker Howard Sadowsky, vice chairman at Julien J. Studley Inc.
"Not only isn't Tishman Speyer concerned, but it's very bullish and feels it can dramatically improve the rental rate they have in the marketplace," Sadowsky said. "They have on the market roughly 150,000 square feet to lease, in a market that's very tight."
Industry observers estimate that Aurora has been paying a monthly rate of $2.40 to $2.60 per square foot for its MGM Plaza space. In today's strong market, where turbulence in the dot-com world doesn't seem to have caused any noticeable bumps in leasing activity, the vacated office space at MGM Plaza could go for more than $4 a square foot.
"We're going into a landlord's market, where the landlords are certainly increasing the rental rates," Sadowsky said. "This (practice of letting tenants out of their leases early) probably will happen more and more, but it hasn't happened yet. And certainly not of (the Aurora deal's) size and consequence."
Working on Watts Deal
The City Council is expected this week to issue a request for qualifications from developers interested in pursuing the long-sought redevelopment of a 10-acre industrial site in Watts.
Earlier this year the city abandoned a multi-year effort to redevelop the property at 930 E. 111th St. The effort had been undertaken with a Lynwood developer whose agreement with the city was terminated several months ago.
This time around, the project site has the added muscle of being listed as part of Mayor Richard Riordan's Genesis L.A. program, which has prioritized a number of inner-city properties for investment and redevelopment.
"This is one (site) at the center of our target right now," said Jasper Williams, director of industrial and commercial development for the L.A. Community Development Department.
The anticipated cost of redeveloping the 10-acre parcel, which is zoned for industrial use, is $10 million, according to estimates from Councilman Mark Ridley-Thomas' office, whose district includes the property.
Located near the Harbor (110) and Century (105) freeways, the property is bordered by Lanzit Avenue to the south and Central Avenue to the east. It's also near the existing Watts Redevelopment Project Area.
The city bought the land nine years ago from Caltrans, which had used the location to make freeway signs and to store railings and other materials. The city then made extensive infrastructure improvements before entering the development agreement that was terminated in March.
"The city reached a point when we determined it was just taking too long and our progress was too slow, and we needed to go back out and find someone else," Williams said.
Whether or not the site can be developed without public funds will depend on what developers have to offer, said Williams.
Cinerama Dome Fenced In
Ground has been broken on a Hollywood redevelopment project set for completion in early 2002.
Pacific Theatres Realty Corp. has closed down its Cinerama Dome theater and broken ground on its $100 million overhaul/expansion of the Sunset Boulevard property. Plans call for a 210,000-square-foot retail and entertainment center with the pre-existing geodesic Cinerama Dome as its centerpiece. The existing theater will be upgraded and 12 new screens with stadium seating will be added, in addition to new retail shops and restaurants.
The 18-month project is within the Community Redevelopment Agency's Hollywood Redevelopment Project Area.
The project is being facilitated by the CRA's issuance of $44 million worth of bonds for a 1,700-space parking structure that the CRA will build and own.
Downtown Building Sold
A five-story, 40,000 square-foot downtown office building at the corner of Eighth and Flower streets has been sold for $2.2 million to a jewelry manufacturer.
Buyer Kobe Katz Inc. plans to occupy two floors of the building, locate at 801 S. Flower St. The building was sold by Jerry Kennett, said Bradley A. Luster of Major Properties, who represented both sides in the deal.
Law firm Argue, Pearson, Harrison & Myers LLP is the building's major tenant, Luster said.
A 37,000-square-foot office building in Camarillo was sold for $2.5 million to a Malibu investor who plans to renovate the structure.
Built in the early 1980s, the office space is part of the Paseo Camarillo complex on Lantana Street.
Excluding the nearby Camarillo Business Center, it's one of the larger office buildings in Camarillo, said Tony Principe of Westcord Commercial Real Estate Services in Westlake Village, who represented the buyer.
CB Richard Ellis Inc. represented the seller, the Carpenters Pension Fund.
Staff reporter Milo Peinemann
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