Musical chairs in Los Angeles' office investment market kicked up a notch in the second quarter when Trizec Properties Inc., which had just closed a deal to buy $1.63 billion worth of Southland office properties, said it was being acquired by Brookfield Properties Corp. and the Blackstone Group.
The sale came as dust was settling on G.E. Real Estate and Chicago-based Trizec's $5 billion acquisition of Los Angeles-based Arden Realty Inc. in December. The $8.9 billion Brookfield-Blackstone deal is considered the second-largest takeover ever of a real estate investment trust.
Trizec officials say fattening up their portfolio for a cash-out wasn't what they initially had in mind when teaming up with G.E. Real Estate to divide up Arden's assets. But a floating rate bridge loan used to finance the Arden deal made it easier for potential Trizec suitors to assemble their own financing, because it cut the amount of secured, fixed-rate debt they would have to take on.
"Even though Trizec has made great strides and has delivered one of the best total returns to stockholders for office REITs during the past three years, the company continues to be undervalued in the public markets," said Trizec Chief Executive Tim Callahan said at the time of the announcement, providing one rationale for the company looking seriously at the Brookfield and Blackstone's bid.
The Arden acquisition added 5670 Wilshire Blvd., Howard Hughes Center and entitlements for close to 1 million square feet of new development to the trio of downtown L.A. trophy towers Trizec had acquired since 2002: Ernst & Young Plaza, Bank of America Plaza and Figueroa at Wilshire. Real estate veterans had characterized the $365 million Figueroa deal in June 2005 as overpriced at the time because the lease for a major tenant, Bank of the West, was set to expire in February. That would leave the building at only 62 percent occupancy at the end of the first quarter.
Now with the pending Brookfield and Blackstone acquisition, the timing of Figueroa at Wilshire comes off as almost prescient.
A trio of even quicker turnarounds was announced in the quarter. Kennedy Wilson Inc. purchased a prominent 12-story office building in Beverly Hills' "Golden Triangle" for more than $51 million. Broadway Real Estate Partners LLC sold the 108,000-square-foot building at 9701 Wilshire Blvd after purchasing it only about two years ago for $37.6 million.
During its ownership, Broadway boosted the occupancy to 95 percent from 85 percent. R.O.A.R. Management Co. Inc. a new talent agency formed by former Endeavor agent William Ward and former MGM vice president Jay Froberg recently moved into the building and took building-top signage.
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