Activision Blizzard Inc., one of the world’s biggest video game publishers, is close to inking a deal to move its headquarters from Santa Monica to El Segundo.
The company expects to sign a lease in the next two months, said George Rose, chief public policy officer for Activision.
“We have to be there very, very soon, by January, so we have to sign the lease very, very soon,” said Rose, who oversees facilities issues for the company. Activision’s lease at its 3100 Ocean Park Blvd. headquarters building will expire Dec. 31.
The company is considering two undisclosed locations in El Segundo and would sign a 10-year lease for 200,000 square feet – roughly the size of its current Ocean Park headquarters, said Matthew Miller, president of CresaPartners LLC., who is representing Activision. He expects the lease to be valued at roughly $75 million.
Rose said the company plans to make the move because the city of El Segundo has more attractive business tax rates. He also said that negotiations with its Ocean Park headquarters landlord, Equity Office Properties, did not go as planned.
“It’s a situation where EOP has not been forthcoming with the kind of things we expect from them. We’ve been here for a very long time; we believe we are a great tenant,” he said. “Going to El Segundo – I don’t see what the choice is that we’ve got.”
Roughly 900 people are employed at the headquarters and a Santa Monica video game studio, which also would make the move to El Segundo. Miller refused to disclose the locations, citing ongoing negotiations.
Activision, publisher of popular video games such as “Guitar Hero” and “World of Warcraft,” considered moving to Fox Hills and Playa Vista before zeroing in on El Segundo. Activision already has some offices in El Segundo and others in Irvine.
The move would make El Segundo a video game company hub; Konami Digital Entertainment Inc. and Nexon America have presences there.
“Activision would be really big (for the city),” said Bill Crowe, assistant city manager of El Segundo, who was aware of the company’s search. “We’ve focused in on creative industries.”
Crowe said that El Segundo offers reduced business licensing fees that “would be more competitive than Santa Monica.” It bases its business tax on metrics that include employee head count and square footage occupied, which would likely result in a “significant reduction in business tax.”
However, Carol Swindell, Santa Monica’s director of finance, said that because Activision’s offices are classified as a “headquarters location,” its business license fees are based on the cost of operations – defined as payroll, utilities and rent – resulting in a lower rate.
“Our business taxes are competitive with other communities and our rates have not increased in the past 15 years or more,” said Swindell, who speculated that Activision was making the move because of efficiencies that would result from moving to a city where it already has other offices.
Equity Office, a unit of New York private equity group Blackstone Group LP, declined to comment.
Gerald Porter, chairman of CresaPartners, is also representing Activision.
A 44-unit apartment building in North Hollywood that was listed in early 2009 for $6.9 million has sold for $5.8 million after earlier deals fell through last year.
However, seller Southbrook Equities LLC paid just $2 million for the building at 7526 Simpson Ave. in 1999, still allowing for a big profit on the sale.
Southbrook, a Beverly Hills-based family business that invests in real estate, sold the building Jan. 15 to Benedict Canyon Equities Inc. of Tarzana, a real estate investment company. Benedict’s purchase of the apartments, built in 1990, was completed as a 1031 tax-deferred exchange.
The deal for the fully leased, nonrent-controlled building, named Simpson Avenue Apartments, breaks down to $131,818 per unit.
“We would have liked to have sold it earlier, just because the market was stronger, but our goal was to rehab the property and sell it,” said Elliot Joelson, vice president of Southbrook. “It had been in and out of escrow. Generally with the uncertainty of the market, people vacillate about value.”
Broker Melinda Russell of Hendricks & Partners Inc., who represented both parties, said that the building is unique for the area because of its unit mix. It has 30 two-bedroom, three-bathroom units; eight two-bedroom, two-bathroom units; and six one-bedroom units. It is rare for an apartment building its size to have so many two-bedroom, three-bathroom units. The average rental rate for those 30 apartments is about $1,400 a month.
Ryan Somers, a real estate consultant who assisted Benedict Canyon Equities with the transaction, said that the ability to raise rents was attractive to the buyer. However, Benedict will actually bring down rents during its first year of ownership given the soft market.
“Now rents are higher (at the property) than they really are in the marketplace,” said Somers, who added that the new owner would start pushing rents during its second year of ownership.
“It was a great nonrent-control buy,” he said.
Staff reporter Daniel Miller can be reached at firstname.lastname@example.org or (323) 549-5225, ext. 263.
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