Deal Nears for Major Glendale Office, Development Site

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Deal Nears for Major Glendale Office, Development Site

Real Estate

by Danny King

One of Glendale’s largest institutional office properties is on the market and could be nearing a sale.

The 385,000-square-foot Glendale City Center has been put on the market by the State Teachers Retirement System of Ohio. Also on the market is an adjacent 1.4-acre parcel that is zoned for office and could accommodate another 350,000 square feet.

Real estate sources said STRS Ohio is seeking $80 million for Glendale City Center, at 101 North Brand Blvd. and is working with half a dozen potential buyers. Meanwhile, Bosa Development Corp. of Burnaby, British Columbia, is said to be close to buying the vacant property for about $8 million.

“We’re activity looking at a couple of opportunities in Orange County and in the greater Los Angeles area as well,” said Richard Weir, vice president of real estate acquisitions for Bosa, though he would neither confirm nor deny whether the firm had an offer in on the lot.

Bosa, which specializes in high-end high-rise condominium complexes, has developed 48 projects worldwide, including three in San Diego, two of which are still under construction.

Tom Bohlinger, a senior vice president at CB Richard Ellis representing the seller, confirmed that both properties are for sale, though he declined to identify potential buyers or asking prices.

“The property did get a lot of interest from the buying community,” said Todd Doney, executive managing director for Insignia/ESG Inc. “It’s a testament to the lack of good product on the market.”

Built in 1991, the property has 335,000 square feet of office space and 50,000 square feet of retail. It is the fourth-largest office building in Glendale and is about 82 percent occupied at rates averaging $2.50 a foot. Its largest tenant, Walt Disney Co.’s Disney Stores, takes 150,000 square feet in a lease that terminates in 2004.

“It’s well located, but it certainly has some leasing risk over the next few years,” said Doney. “It’ll be interesting to see what it trades for.”

Floor Appeal

Eleven miles to the east, Tri-Cities’ largest lease deal of the year was signed in East Pasadena.

Management consulting and technical services firm Tetra Tech Inc. will be consolidating its four Pasadena offices into a new, 68,500 headquarters in Pasadena Corporate Park at Foothill Boulevard and Halstead Street. The 12-year deal was valued at more than $25 million.

“They get a brand new facility where they can consolidate,” said Doney, who, with Insignia’s Nico Vilgiate, represented both the tenant and landlord, Kearny Real Estate Co.

Tetra Tech expects to occupy the new space in either the fourth quarter of 2002 or the first quarter of 2003. It will get building-top signage on the 115,000-square-foot building, of which the remaining 46,500 square feet has yet to be leased.

At a starting rent of $2.25 a foot, the deal illustrates Tetra Tech’s willingness to pay for a new product that has, at 34,000 square feet, some of the largest floor plates in the submarket, according to Bill Boyd, senior vice president at Grubb & Ellis Co.

“That’s great rent for East Pasadena,” said Boyd. “There is sublease space in even higher quality buildings in Glendale and Burbank from $1.70 to $1.85, although for not as long a lease term.”

Where the Boys Are

Portland, Ore.-based Qmedtrix Systems Inc. more than quadrupled its space in the West Valley by signing a six-year, 22,000-square-foot lease at Malibu Canyon Business Park in Calabasas. The deal was valued at $3.5 million.

“It’s good to have a tenant growing in this economy,” said CRESA Partners Senior Vice President Bryan Lewitt, who represented Qmedtrix. “They like the area because it’s good for recruiting. It’s a very fertile ground for them.”

The firm specializes in producing software that analyzes medical billing and workers’ compensation claims. Proximity to Woodland Hills-based Blue Cross HMO, Health Net Inc. and WellPoint Health Networks Inc. helped lure the six-year-old company to the site at 26677 W. Agoura Rd.

Jeff Johnston of Johnston Group represented the landlord in the deal.

We’re Done Here

Buy, lease up, flip.

That was the strategy employed by Cimarron Properties, a subsidiary of a joint venture between Morgan Stanley and GMS Realty LLC., in its seven-year ownership of Somerset Village Shopping Center in Lancaster. The company just sold the property to Lancaster Real Estate Holdings LLC. for $5 million.

When Cimarron Properties bought the 76,000-square-foot retail center out of bankruptcy in 1995, it was 50 percent vacant, according to Marcus & Millichap Senior Director Chris Maling, who represented the seller. Since then, the vacancy rate has dropped to about 10 percent, with rents ranging from 80 cents to $1.35 a foot. The center has 24 tenants and is anchored by a Ralphs supermarket.

“They could not find any other properties in the infill portion of L.A. County that offered this type of yield and future potential,” said Maling of the buyer, which projects an annual return of greater than 12 percent on its all-cash purchase. “Buyers are moving equity into outlying areas to chase the yields.”

Bigger Muscle Space

Chatsworth’s Powerhouse Gym is bulking up.

The holder of the franchise for the fitness center at 20745 Nordoff St. has assumed the lease for a 63,000-square-foot building at the corner of Nordoff Street and De Soto Avenue, and will be moving from its current location a half a block away to the new site this summer. The building, once a Builder’s Discount home improvement center, had been a warehouse.

The remaining 20 years on the lease was valued at $7 million, according to owner Derek Scharlin, who will be spending an additional $1 million on improvements.

“I’ve always been interested in this spot,” said Scharlin, who opened the existing, 20,000-square-foot Powerhouse Gym 10 years ago. “We’re picking up opportunities such as (having) an indoor basketball court and a racquetball court. It will expose us to a customer base that doesn’t consider us now.”

Upon build-out, Powerhouse will be taking 45,000 square feet for its operations, and will lease out the balance to complementary businesses like a food service operator, a chiropractor and a martial arts center.

Staff reporter Danny King can be reached at (323) 549-5225 ext. 230, or at

[email protected].

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