Sale Nears for Downtown Complex With Macy's, Hotel
By DANNY KING
CIM Group Inc. is close to a deal to buy MCI Center, a 2.5 million-square-foot downtown complex that includes a 678,000-square-foot office building, the Macy's Plaza retail center and the 485-room Hyatt Regency Los Angeles.
The deal is valued at about $115 million by a source familiar with the negotiations, and should it go through, CIM would gain ownership of nearly three contiguous blocks.
The company, which is in escrow on the estimated $43 million purchase of Chase Plaza, is negotiating for MCI Center with Girec Corp., a unit of Tokyo-based Mizuho Trust & Banking.
The deal would solidify CIM, founded in 1994 by Shaul Kuba, Richard Ressler and Avi Shemesh, as one of the major real estate players both downtown and in Hollywood, where it has also been quite active lately.
John Given, senior vice president at CIM, earlier confirmed that the company was under contract to buy Chase Plaza, but declined to disclose the price. Shemesh declined comment.
Neither officials from Beverly Hills-based Kennedy-Wilson Inc., which has the listing on MCI Center, nor Mizuho returned calls.
If the MCI deal is closed, CIM, which recently bought a 117,000-square-foot building at Seventh and Hope streets for more than $7 million, would own properties on the blocks bounded by Flower, Seventh, Hope and Ninth streets, along with 2,000 underground parking slots.
The firm recently broke ground on its $247 million South Village project, one block south of MCI Center, which will include 1,200 residential units and 137,000 square feet of retail. With Chase Plaza, CIM, which owns the parking lot at the northeast corner of Ninth and Hope streets, would control about half the block directly east of South Village.
The estimated $43 million deal for Chase Plaza, a 443,000-square-foot building at 801 S. Grand Ave., was struck with Shuwa Investments Corp. The half-occupied, 22-story building is one of three competing sites to serve as temporary headquarters for the Los Angeles Police Department while a replacement is built for Parker Center. The others are the 472,000-square-foot Transamerica Center building at 1149 S. Broadway and 600-650 Spring St.
Fitting with profile
The investments are consistent with CIM's strategy of buying multiple properties in urban areas.
It owns five Hollywood buildings, including the Hollywood Galaxy retail center and TV Guide Hollywood Center office building, totaling more than 800,000 square feet.
Gemstar-TV Guide International Inc. recently upped occupancy at its namesake building to 60,000 square feet from 45,000 square feet, and CIM, which bought the property in 1998, is moving forward with the renovation of the building's 30,000 square feet of retail space.
The Hollywood Galaxy, meanwhile, has languished since the firm bought it in 1999. Plans to redevelop the property, now two-thirds occupied, have yet to materialize. And CIM's plans for a 60,000-square-foot retail and entertainment center at Hollywood Boulevard and Cherokee Avenue have been delayed by Laemmle Theatres' decision to pull out of the project last year.
In Santa Monica, the company bought and renovated nine buildings totaling 225,000 square feet along the Third Street Promenade between 1995 and 1998.
"If you look at CIM's history, they like to create critical mass in urban areas that have long-term potential upside," said the source. "Downtown is a similar type of play."
Girec put the 30-year-old MCI Center complex, bounded by Flower, Seventh, Hope and Eighth streets, on the market for $125 million earlier this year.
The two most recent purchases also mark the ongoing retreat of Japanese corporations that invested heavily in downtown real estate in the 1980s. Girec bought MCI Center for a reported $210 million in 1987, while Shuwa bought Chase Plaza in 1986 for about $125 million, according to a Los Angeles Times report at the time.
"Anything that CIM buys is good for downtown," said Jeff Lee, president at Lee Group Inc., which has a partnership with CIM on both the recently completed Flower Street Lofts at 11th and Flower streets and Grand Avenue Lofts, which will break ground at 11th Street and Grand Avenue in October. "They're quality developers." Lee could not confirm that CIM was buying MCI Center.
Known as Broadway Plaza when opened in 1973, the mixed-use complex was renamed MCI Center when the telecommunications giant signed a long-term lease in the office tower in 1993, while the retail component was renamed Macy's Plaza in 1996, the year after Federated Department Stores Inc. acquired the chain.
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