Deal Expected for Huge Warner Center

Staff Reporter

An agreement is in place to sell a bulk of Warner Center Properties, the sprawling 2.3 million square foot of office, retail and hotel complex along Oxnard Street in Woodland Hills.

Real estate sources said that Douglas Emmett Realty Advisors of Santa Monica has a deal for the 1.8 million-square-foot Warner Center Plaza portion of the site. While the purchase price was not disclosed, local sources estimate that the deal to be worth around $360 million.

The six-building Plaza portfolio, along with the adjoining 468,000-square-foot Warner Center Business Park, had been on the market for 10 months.

Both the Warner Center Plaza and Business Park are owned by AH Warner Center Properties LLC, a joint venture of the Alaska Permanent Fund and Harvard University. Real estate sources said that Century City-based Kearny Real Estate Co. is set to buy the business park for about $60 million.

The agreement comes after months of negotiations between Douglas Emmett and the sellers' rep, AEW Capital Management, according to another source.

Officials from Douglas Emmett, AEW Capital Management and Alaska Permanent Fund declined to comment on the agreement. Kearny officials could not be reached.

The most recent large deal in the market was far smaller last month's sale of the fully leased, 217,500-square-foot First Financial Plaza in Encino, which sold for $47.3 million, or $217 a foot. A similar per foot figure for Warner Center Plaza would peg its sale price at $391 million.

Warner Center Plaza is said to be as much as 20 percent vacant, well above the 16 percent recorded for the West Valley in the first quarter of 2002.

Since the beginning of the year, a number of tenants have either consolidated operations or decided not renew their leases, a circumstance that is believed to have affected the purchase price. "The income stream that was in place was altered, so the value of the property dropped," said one source.

Warner Center Plaza is made up of a half-dozen high-rise office buildings on the south side of Oxnard Street between Vassar and Canoga avenues, while the business park is made up of 15 smaller buildings straddling Califa Street east of Canoga.

In all, Warner Center Properties, which was developed by Robert Voit and Boston-based Copley Advisors between 1977 and 1991, covers 50 acres. The current ownership joint venture, of which two-thirds is controlled by the Alaska Fund, bought the property from New England Life in 1995.

Earlier this year, Voit was rumored to be interested in buying back the business park portion of the project, but his Newport Beach-based company, Voit Cos., is not involved in either purchase, sources said.

Warner Center Properties is the central component of Warner Center, the 1,000-acre development that was previously Warner Ranch. Warner Bros. co-founder Harry Warner bought Warner Ranch in the 1940s as a horse farm. His estate (Warner died in 1958) sold off the property to developers in the early 1980s.

The property got a boost in the last two weeks when SunAmerica Inc. signed a 157,000-square foot-lease in the Plaza 3 building, at 21650 Oxnard St. The insurance and financial services subsidiary of industry giant AIG increased its occupancy in the building by 70 percent in a deal worth $50 million.

The requirement signals a shift out of Century City for SunAmerica, which takes about 130,000 square feet at 1999 Avenue of the Stars, and has had its headquarters there since 1993.

SunAmerica's Century City lease is up next year, after which the company expects to take less space in either the current building or a nearby Westside locale, according to Lawson Martin, executive vice president at Travers Realty.

"They have a larger group in Century City that will be downsizing, so they're shifting their people into more cost effective space." said Martin, who, with Jim Travers, represented SunAmerica on the deal. Martin estimated the rent for SunAmerica's Warner Center space, about $2.65 a foot, to be between 30 percent and 40 percent less than its Century City rates.

The increase in space at the 25-story Plaza 3, where SunAmerica has occupied roughly 97,000 square feet for about 10 years, will come with building-top signage rights. There is currently no corporate signage on the 605,000-square-foot building.

Bill Ingles and David Solomon of CB Richard Ellis represented the landlord on the deal.

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