With the sale of a 12-story office building in Gardena, Younan Properties Inc., a national office properties investment group, has completed its exodus from the California market that has been three years in the making.
And the company will begin its next phase with a splash.
With a sense that smaller market cities like Dallas and Chicago have been overlooked, Younan Properties chief executive Zaya Younan has pulled the trigger on a portfolio purchase that will make his company an even bigger landowner in those cities.
Younan will significantly add to its holdings in Dallas and Chicago on Monday, when its purchase of a $280 million portfolio from Transwestern Commercial Services is expected to close.
"Because we feel that these markets are overlooked, we feel these markets are going to perform well in years to come," Younan said.
The portfolio includes seven parcels three in Dallas and four in Chicago. The deal gives Younan Properties 1.1 million square feet of office space in Chicago, and one million square feet of space in Dallas, where the company is already heavily invested. "Starting (this) week we are going to be a very large landlord in Chicago," Younan said.
About 50 offers were made for the Transwestern portfolio.
Woodland Hills-based Younan Properties is leaving California and in particular the Los Angeles County market because Younan says his company's research has indicated that there is little room for increased valuation in the office building market and he feels that office building prices are too high. That's a contrarian view compared to other big real estate companies.
"We don't see a major adjustment in rent and we also don't see a major appreciation in values," Younan said. "That's why we are going to markets where rent growth will have a major influence on valuation increases."
Younan completed it local pullout Sept. 8 with the $58 million sale of the 255,000-square-foot Pacific Pointe building in Gardena to Houston-based Transwestern. It's the last sale of nearly 35 office buildings the company has moved in the last three years.
The company was founded in 2001, and began buying property in earnest amassing a portfolio valued at $1.5 billion and totaling about seven million square feet of Class A office space.
Rick Putnam of Trammell Crow Co., who represented Younan Properties in the Pacific Pointe transaction, lauded the company for sticking to the divestment plan that it began three years ago.
"Every investor has their own business plan and the best test of whether they are a good investor is whether they follow that plan," Putnam said. "Other investors feel that rent growth will overtake rent compression and contribute to increased values going forward, and I believe in that as well."
Kevin Shannon, vice chairman in CB Richard Ellis Group Inc.'s South Bay office, disagrees with Younan's investment strategy, citing the strengths of the Los Angeles area market.
"Southern California is always a more attractive place to own real estate," Shannon said. "It's a more liquid market. The fundamentals are stronger in L.A. than in Texas or Chicago. It's not a bold move. Southern California is on everybody's shopping list."
Younan plans to continue operating its Woodland Hills offices.
Architecture Lease Deal
An international architecture and planning firm has signed a lease to snag a rare piece of creative office space at a downtown office building.
RTKL Associates Inc. has signed a 10-year lease to expand into 40,000 square feet of concourse-level space at the Bank of America Plaza.
The $10.5 million lease deal with landlord Trizec Properties Inc. allows the firm to nearly double the size of its Los Angeles office. RTKL has occupied 25,000 square feet of space on the building's concourse level since 1996.
"We like to be on one floor," said RTKL chairman Paul Jacob. "It's one big open space."
The large, open office area in the 333 S. Hope St. building is unique for a downtown office building, and this helped RTKL secure the space at a below-market rate, said David Kluth, executive managing director at Studley Inc., which represented RTKL in the deal.
The lease works out to about $263 per square-foot.
"It's well below market for Class A space," Kluth said. "The uniqueness of the space cut both ways; the prospects for concourse level creative type space aren't unlimited especially in downtown L.A. Had this space been in a different market where the creative or entertainment industries may typically reside this space may have demanded a greater rental value."
Jacob said that the firm, which has had a presence in Los Angeles since 1986, needs the additional space at the 55-story building after adding over 50 employees to the Los Angeles office in the last two years. About 200 people will work in the expanded office.
"I think it's gratifying to us that after 20 years in L.A. we are participating in what we want to do as a firm which is affect the physical environment of the cities we occupy," Jacob said.
Studley executive managing director Josef Farrar also represented RTKL in the transaction. Trizec was represented in-house by John Barganski and Patrick Lacey.
Simpson Performance Products, makers of motor sports safety apparel and equipment, will consolidate two Torrance area manufacturing facilities into a new Harbor City space after signing a 10-year, three-month lease deal.
The lease is valued at $3.65 million.
Beginning in October, the company will occupy 52,069 square feet of space at 1405 W. 240th St. The new facility will also include a 4,000-square-foot retail showroom, said Courtney Bell of The Klabin Co., who represented Simpson on the deal with landlord Storm Properties Inc. The lease works out to about $70 per square-foot, a below-market rate, Bell said.
"It was a result of a private owner who had a vacancy and wanted to fill it and didn't want to hold out for the last penny on the table," Bell said. About 75 people will work at the new facility.
Jeff Morgan and Colin Walker of CB Richard Ellis Group represented the landlord.
Staff Reporter Daniel Miller can be reached at (323) 549-5225, ext. 263, or firstname.lastname@example.org .
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