Foreign Investors Lining Up for L.A. Property Purchases

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A partnership of Los Angeles developer Jeff Worthe and Delaware-based Stockbridge Real Estate Funds has purchased an ocean view hotel development site in Santa Monica.


The half-acre property, at 1327, 1333, and 1337 Ocean Ave., is entitled for a 73-room lodging. The seller was Hill Street Realty LLC, a local partnership headed by Joe Penner of Legg Mason Real Estate Investors Inc., an investment firm. The deal is valued at $34 million, or about $466,000 per room.


The sale stands out because it is rare that a significant piece of development-ready real estate in Santa Monica changes hands. But the losing bidders also make the deal noteworthy.


The bidding process, with twelve parties participating, highlighted an emerging trend in the local real estate market: increased international interest. Half of all bidders were from Ireland, England, India, Southeast Asia and the Middle East, according to Arthur Buser, president of lodging capital markets for Jones Lang LaSalle Hotels.


“Particularly from the United Kingdom, the view was, ‘Jeez things just feel inexpensive,’ said Buser, who represented the seller in the deal. “They believe the dollar may continue to devalue and the fact that entitlements were in place gave offshore bidders a lot of comfort because the challenges of developing in Santa Monica are well known.”


The sale comes on the heels of several marquee purchases by foreign real estate firms. In nearly every case, foreign companies are making plays for irreplaceable or gateway assets.


Such recent deals include England’s Candy & Candy paying $500 million for the 9900 Wilshire Blvd. condo development site in Beverly Hills, Dubai’s Emaar Properties paying almost $100 million for a Wilshire Corridor condo development site and the $275 million purchase of the Two Rodeo shopping plaza by an Irish partnership.


Buser said foreign interest in local trophy properties has increased. But some real estate industry observers say that foreign buyers may be overvaluing the Los Angeles market, especially since the residential side is in the midst of a significant downturn.


And there is precedent: Japanese investors notoriously paid top dollar for downtown L.A. high rises at the height of the 1980s real estate boom only to sell out at huge losses when the the market bottomed out in the early 1990s.


Still, Buser said that when it comes to unique assets, the interest will likely not wane. The buyer represented itself on the deal. Jeremie Babinet of Jones Lang LaSalle Hotels, a unit of brokerage Jones Lang LaSalle Inc., also represented the seller.



Under the Wire

StarPoint Properties LLC, a Beverly Hills-based real estate investment firm, and Praedium Group LLC, a New York City-based real estate investor, are joining to purchase a four-property apartment portfolio that includes complexes in Koreatown and Winnetka.


There are 353 units in the $50.1 million deal. The seller was real estate investor Jeff Greene. The two parties brokered a similar deal for eight properties in September 2006.


The deal comprises apartment complexes at 249 and 269 S. LaFayette Park Place in Koreatown, 700 S. Berendo St. in Koreatown and 7500 Mason Ave. in Winnetka. The purchase price breaks down to $141,926 per unit.


Ron Harris of Marcus & Millichap Real Estate Investment Services Inc. said that the sale of the two, four-story buildings on LaFayette Park Place totaling 268 units closed July 11 in timely fashion.


“It closed before there was a meltdown in the capital markets,” said Harris, who brokered both sides of the deal for the two buildings. “(But) the apartment market will remain strong and viable and is considered to be far less risky and at this point and more profitable.”


Despite Greene’s sale of 12 apartment buildings in the last year, he is not exiting the market, said Darin Beebower of Madison Partners, who also represented both sides of the LaFayette Park Place transaction and represented both sides in the sale of the other two buildings. “It’s more kind of a trimming of the portfolio than an exit of the market place,” he said.



Burbank Lease

Capital Network Leasing Corp. has signed a 60-month lease for 14,984 square feet of space at 2600 W. Olive Ave. The office will serve as the new corporate headquarters of the company, which is moving from Sherman Oaks.


The deal, which closed in mid-August, is valued at $2.95 million, or $3.28 per square foot per month. The equipment leasing company will make the move around the beginning of 2008. The space is in a 10-story building in the heart of the Burbank Media District.


The area is a red-hot leasing market, with low vacancy rates. As of the second quarter, the vacancy rate for Class A space in Burbank was 4 percent, according to Grubb & Ellis Co. What’s more, Nico Vilgiate of CB Richard Ellis Group Inc. said that the vacancy rate in the media district is about 3 percent.


“(Capital Leasing) looked at the entire greater San Fernando Valley area,” said Vilgiate who represented the company in the deal with landlord Legacy Partners Inc. “They liked the quality of the building.”


The office building at 2600 W. Olive Ave. has a considerable amount of vacant space.


CB Richard Ellis Group’s Jeffrey Weller also represented the tenant and Legacy Partners was represented by Brad Feld of Madison Partners.



Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.

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