Is Northrop Stuck With South Bay Property?

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The Defense Department’s Sept. 10 announcement that it would delay awarding a $35 billion aerial tanker contract until the next presidential administration could be mucking up Northrop Grumman’s office plans in the South Bay.

Since last week’s surprise announcement, real estate industry experts have speculated that Northrop Grumman Corp.’s $120 million lease of the 333,000-square-foot Continental Tower in El Segundo was in the end, all for nothing.

Northrop and Airbus parent European Aeronautic Defense and Space Co. were awarded the tanker contract March 1 and Northrop signed the 10-year lease June 18. But in August, after complaints by loser Boeing Co. that the process was unfair, the Pentagon reopened bidding only to decide last week to leave the entire issue up to the next president.

Industry sources, who declined to comment on the record because of business relationships with Northrop, said that the defense contractor specifically signed the lease because of the tanker deal. The plan was to move employees from other divisions into the 16-story building in order to make space at other facilities for work on the tanker program.

With a “cooling off” period now in effect for the contract battle, the sources said that Northrop would simply have to find a way to use its extra space. The company employs about 5,000 people in El Segundo at various facilities. However, Northrop denied that the delay in the contract award was an issue.

“Our plans to move into the building are not affected by today’s announcement,” said Jim Hart, a spokesman for Northrop.

Northrop has had plans to begin moving in phases during the fall and fully occupy the building by July 2009. The building is owned by a partnership of commercial real estate developer and manager Barker Pacific Group Inc. of Los Angeles and Prudential Real Estate Investors.

Barker Pacific did not return calls seeking comment.


Big (Little) Deal

A local family trust has paid the highest per-square-foot price for a West Los Angeles building on Pico Boulevard, according to a broker who handled the transaction.

The $3.6 million paid by the Chan Family Trust for a 5,173-square-foot building that houses a Coco’s Bakery & Restaurant breaks down to $696 per square foot.

“It’s unbelievable in this economy don’t ask me how I did it, but I did it,” said Jonathan Ahron of Charles Dunn Co., who represented the trust in its deal with seller Sherwin Family Partnership of Pacific Palisades.

The Chan Family Trust purchased the property at 8727 W. Pico Blvd. on July 3 on a 1031 tax-deferred exchange basis after selling a retail property at 8528-8532 W. Pico Blvd. for $1.5 million.

Coco’s has occupied the property for 18 years, but its lease expires in June 2009. Ahron said that negotiations with the restaurant company are under way, but that options to lease it to other users are being considered. The Sherwin partnership decided to sell because it was afraid the building could remain vacant for some time if Coco’s does not renew its lease.

David Aschkenasy of Charles Dunn also represented the buyer and Brook Vinetz of RE/MAX Equity Group Inc. represented the seller.


Commerce Industrial Lease

Valassis Direct Mail Inc., a Livonia, Mich. marketing services company, has signed a $15 million lease for industrial space at the Telacu Industrial Park in Commerce.

The 10-year, five-month lease for the 235,000-square-foot building at 5500 Olympic Blvd. closed in August. Valassis plans a major rehab of the building before it occupies the space in March.

The remodel, which will include the construction of 30,000 square feet of office space and the installation of new manufacturing equipment, should cost between $2 million and $3 million, said Jerry Barham, a senior vice president with landlord Telacu Industries Inc., an entity of Telacu Development Corp., a community development business.

Barham said that Valassis would soon decide whether Telacu or a third-party contractor would handle the construction. Valassis, which creates direct-mail programs, is leaving Torrance for Commerce and will do printing at its new facility.


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

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