Increased military spending continues to spark an expansion of the defense industry in the South Bay, one of the weakest markets in Los Angeles County.

Northrop Grumman Corp. inked a five-year lease for 192,000 square feet at 222 West 6th St. in San Pedro. The lease is one of the largest transactions in Los Angeles signed this year, and it is the second largest South Bay transaction Northrop has executed this year.

"This transaction is representative of a continuing resurgence of leasing in the South Bay by aerospace and defense users," said Tim Vaughan, a senior vice president with CB Richard Ellis Group Inc., who helped represent L.A.-based Northrop Grumman in the deal.

The dollar value of the lease wasn't disclosed, but at market rates of about $2 a foot, the deal would be worth about $23 million to the building's owner, L.A.-based construction giant Tutor Saliba Corp.

The division Northrop Grumman Defense Mission Systems is expanding its presence in the building by about 32,000 square feet. The added space at market rates will cost the company $3.8 million over the life of the lease.

Northrop looked at several alternatives but in the end decided to stay put, said Erik Van't Hof, on-site representative for Pacific Place Associates, a holding company owned by Tutor Saliba.

"We are very pleased," said Ronald N. Tutor, president of Tutor Saliba. "They have been our major tenant and we are very pleased they have agreed to stay and we hope to keep them for all the years after that."

Tutor Saliba built the 265,000-square-foot high-rise, dubbed Pacific Place, in 1988 to originally accommodate a former aerospace firm. The construction company has owned the office building ever since.

Northrop Grumman agreed in June to a four-year, $12.5 million lease for 216,617 square feet in Overton Moore Properties Inc.'s Douglas Technology Center at 445 N. Douglas Street in El Segundo.

That's been welcome news for landlords in the South Bay, consistently one of the weakest office markets in L.A. County. At the end of September, the South Bay market had an average 20 percent vacancy rate and average asking rents of about $2 a square foot, according to Grubb & Ellis Co.

In addition to Vaughan, Northrop Grumman was represented by CBRE's Bill Bloodgood and Stan Gerlach.

Finding Financing
Madison Partners continues to expand into financing sales of commercial buildings that the Century City firm has been brokering.

The firm began assisting clients with financing two-and-a-half years ago. By the end of 2005, Madison Partners will have put together financing in excess of $600 million, compared with $100 million worth of loans in its first year.

"We got into the financing business because we can provide that service at a high level," said Madison Partners principal Bob Safai. "And a lot of times our clients are better off refinancing their asset rather than selling it."

Madison is in a field that includes other brokerages that offer financing, such as Eastdil and Secured Capital Corp. which recently agreed to a merger.

Recently, Madison Partners completed financing worth $50.6 million on two transactions it brokered that sold for $64.8 million.

The firm first financed $32 million for the Lakes at West Covina a 15-year-old office park that is a premiere East San Gabriel Valley property when it was owned by West Covina Lakes Associates LLC.

Then, in an off-market deal, West Covina Lakes Associates sold the complex to Culver City-based Ten West Associates LLC for $40 million. The Lakes at West Covina consists of two buildings comprising 174,000 square feet that sit on a 6.16-acre campus with landscaping that includes a pyramid, a lake and "dancing" fountains.

The financing completed prior to the sale allowed the seller to maximize the value of the property and maximize the buyer's returns, said Safai.

In a separate deal, Madison Partners arranged $18.6 million financing for the $24.8 million sale of the four-building Nordhoff Industrial Complex in Chatsworth. Private real estate investor Jerry Katell sold the industrial park to L.A.-based Palisades Investors LLC.

The complex, located at 25000, 20550, 20640, and 20670-20680 Nordhoff St., consists of four buildings containing 184,700 square feet on a 9.6-acre campus. The property is 100 percent leased. The buildings were completed between 1978 and 1980, and the complex contains 482 parking spaces.

'Foot Race'
After an aggressive bidding process, HKS Architects Inc. has signed a lease for the entire building at 9441 Olympic Blvd. in Beverly Hills.

The Dallas-based firm signed a seven-year lease for the 25,359-square-foot building that's worth about $5 million, according to Brian Davies, a principal at CRESA Partners who helped represent the tenant.

The building is owned by Can O'Corn LLC, which was represented by Barry Beitler of Beitler Commercial Realty Services. Beitler is also a limited partner in the ownership.

HKS had been subleasing space in the building. To take over the building, it had to out-bid the existing tenant, Siegel & Gale an advertising agency that's part of global media conglomerate Omnicom Group Inc.

"It became somewhat of a foot race to the finish," said Davies. Siegel & Gale is moving to a space in 10960 Wilshire Blvd., a Westwood Village office tower owned by Equity Office Properties Trust.

In addition to Davies, HKS Architects was represented by CRESA Partners' Dave Toomey.

*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at .

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