Two large property sales have occurred recently that have included debt assumption by the buyers, highlighting an emerging trend in the local real estate market. As financing becomes more difficult to obtain, some buyers are assuming in-place debt on property, says Kevin Shannon, a broker for CB Richard Ellis Group Inc., who handled two recent deals in Torrance and Culver City.
"Having existing debt in sales is an advantage in this current market," said Shannon, who added that the debt markets are showing signs of improvement in recent weeks. "If you are having trouble getting loans, (an existing loan) has a more favorable interest rate and it's already done."
In one debt assumption deal, El Segundo-based Continental Development Corp. paid $20.9 million for two adjacent medical office buildings in Torrance. In the other deal, an unidentified foreign investor from Mexico paid $29.5 million for a Culver City office building. Both deals closed in April.
Continental Development, an office developer and owner, purchased the two buildings from WRA Property Management Inc., the entity of a Newport Beach-based real estate investor. The buildings at 3500 Lomita Blvd. and 23560 Madison St. are near Torrance Memorial Medical Center. The Lomita building has 35,348 square feet and the Madison building has 40,580 square feet.
In the deal, the buyer assumed approximately $13.3 million in existing debt from the seller's Washington Mutual loan.
In the Culver City deal, the buyer purchased the 111,067-square-foot office building at 5901 Deep Valley Circle from Santa Barbara-based Pacifica Real Estate Group. The property sits on about 5.5 acres. Pacifica bought the building three years ago for $22.4 million. The building is 100 percent occupied. In that deal, the buyer assumed approximately $14.8 million in existing debt from Pacifica's Allstate Insurance loan.
Michael Moore, Dave Smith and Tim Vaughan of CB Richard Ellis also represented both sides of the medical office deal. Moore and Stan Gerlach of CB Richard Ellis also handled the seller side in the Culver City deal and Jeff Pion of CB Richard Ellis handled the buyer side.
Culver City Deal
The forthcoming Plaza at Culver Studios, a three-story, mixed-use project in downtown Culver City, has signed a prominent retail tenant.
Minneapolis-based Room & Board Inc., a furniture retailer, has signed a deal for 40,000 square feet at the three-story project, which is currently under construction. The 15-year deal is valued at about $30 million and closed April 1.
The Gensler-designed project, which is located at 9300 Culver Blvd., is slated for completion in late 2009 and Room & Board should be open for business by early 2010.
"We looked at Culver City as truly a destination location unlike many shopping venues throughout Southern California," said Myron Sokolsky of Grubb & Ellis Co., who represented the furniture company.
While the starting rental rate was not disclosed, the asking rate for ground floor space is between $4.50 and $4.75 per square foot per month on a triple net basis, said Christine Deschaine of Lee & Associates, who represented the landlord, developer Rush Pacifica LLC.
Century City Lease
National law firm Seyfarth Shaw LLP has amended and expanded its lease at 2029 Century Park East in Century City. The deal, which will keep the firm at the property through 2021, is valued at more than $60 million. The firm's old deal for 65,000 square feet would have expired in 2010.
Seyfarth currently occupies the 31st, 32nd and 33rd floors in the building, but is growing and wanted higher-quality space, said Mike Catalano of Studley Inc. The lease expansion calls for 80,160 square feet on floors 34 through 36. Currently, floors 35 and 36 are occupied by global law firm Foley & Lardner LLP. In March Foley & Lardner will relocate to City National Plaza downtown, allowing Seyfarth to take over the space.
The per-foot lease rate for the new Seyfarth deal was not disclosed but the asking rate at the property is between $5 and $5.75 per square foot per month on a full-service gross basis.
Jeff Lasky of CB Richard Ellis, who represented landlord JP Morgan in the deal, said the Century Park East tower is now 92 percent leased. Parking garage and lobby renovations were completed in December. The renovations bring the property in line aesthetically with the adjacent 2000 Avenue of the Stars office building.
David Gelfand of Studley also represented the tenant. Patti Gilbert of CB Richard Ellis also represented the landlord.
Staff reporter Daniel Miller can be reached at firstname.lastname@example.org or (323) 549-5225, ext. 263.
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