Santa Monica’s landmark Clock Tower office building might soon become part of a portfolio that includes historic New York trophy properties.
The U.S. division of Rome’s Sorgente Group is under contract to buy the 1920s art deco office building in downtown Santa Monica for $35 million, sources told the Business Journal. At $655 a square foot, it would be the richest Class A office building sale in the city in three years.
Sorgente Group of America Corp. is a real estate investment firm that specializes in historic properties, including the Flatiron Building in New York. It acquired downtown L.A.’s celebrated Fine Arts building in June. Brokers said the back-to-back deals demonstrate that Los Angeles is an important market with notable architectural gems.
“They are recognizing L.A. is an international city where they want to have a stake; it’s up there with New York and other major metropolitan areas,” said Adam Tischer, vice president at downtown L.A.’s Colliers International who was not involved in the deals. “The beauty (of these buildings) is virtually irreplaceable and it’s an opportunity to own a piece of art and a real estate asset.”
The parent company is one of the largest real estate groups in Italy with more than $2 billion worth of property, including the Baglioni luxury hotel chain. The U.S. real estate group made a name for itself purchasing historic buildings in Manhattan, where it is headquartered. It owned the Chrysler Building until 2008 and today owns a majority stake in the Flatiron Building, the SoHo Greene Street and others.
In June, the company bought its first property outside the Big Apple: the 1926 Romanesque revival-style Fine Arts building, a 12-story, 120,000-square-foot building decorated with gargoyles at 811 W. Seventh St. in downtown Los Angeles for $28.5 million.
The Clock Tower, meanwhile, has been on the market since last year. As part of the deal for the building, which is owned by Clock Tower LLC, Sorgente will assume existing debt of about $17.5 million, representing about half the transaction price.
Real Capital Analytics Inc., a commercial real estate consulting and research firm, lists Sorgente as the buyer in a recent property report. Two sources knowledgeable about the deal confirmed it to the Business Journal but were not authorized to speak.
Clock Tower’s Joe Ruvolo declined to comment. CBRE Group Inc., which listed the building for sale in an offering memorandum, did not return calls.
Sorgente could not be reached for comment. But Veronica Mainetti, the U.S. chief executive and daughter of the parent company’s chief executive, told New York’s Commercial Observer in 2010 that the company’s strategy is always to be on the hunt for historic trophy buildings.
“We believe these kinds of buildings that have architectural value and historical value do better, especially in periods such as this,” she said. “So we’re always looking.”
Detailed design
Built in 1929, the 12-story, 53,465-square-foot Clock Tower was originally the headquarters for Bay Cities Guaranty and Loan Association, which occupied it for years. It was designed by Albert R. Walker and Percy A. Eisen, who also designed the Beverly Wilshire Hotel and the Oviatt and Fine Arts buildings in downtown Los Angeles.
The Clock Tower’s white façade, zigzag and chevron design details and a functioning clock on all four sides of the top of the tower give it its distinctive look. The city designated the building, at 221-225 Santa Monica Blvd., a historic landmark in 2004.
A previous owner completed a several-million-dollar renovation in the early 2000s that included bringing the clocks back to working order after stalling at 4:31 a.m. on Jan. 17, 1994, during the Northridge Earthquake. Clock Tower LLC bought the building in 2004 for more than $14.6 million, according to CoStar Group Inc.
Prospective new owner Sorgente is believed to be plannning a few upgrades to the property but will maintain it as a landmark and as functioning office building. The price paid by the company, at $655 a square foot, would be the highest on a square-foot basis for a Class A office in Santa Monica since 2009, when the Lantana East Campus on Olympic Boulevard sold for $900 a square foot, for a total of $60.3 million, according to CoStar.
The building overlooks the Third Street Promenade and is located in the heart of Silicon Beach, where tech companies such as Google Inc. and Riot Games Inc. have absorbed so much space that rates and occupancy in the area are among the highest in Los Angeles County.
That’s benefited the Clock Tower. The building is 100 percent leased to tenants, including online car pricing company Truecar.com, group deal website Living Social and AOL’s Advertising.com. LGO Hospitality Group’s Misfit Restaurant and Bar is on the ground floor.
The building is believed to be the only high-rise in Santa Monica that provides full-floor spaces for tenants. Its 4,000-square-foot floor plates, much smaller than a typical office building, are more in line with small but growing firms.
Randy Starr, a principal at brokerage Avison Young on the Third Street Promenade who handles deals for tech companies in the area, said the floor plates make it a very attractive building for such companies.
“The square footage works for the tenant who for that size would never have a full floor elsewhere,” Starr said. “There’s an appeal to that.”
That unusual feature should allow Sorgente to increase monthly rents in the building, which currently average about $4 a square foot, or 70 cents less than the overall market.
Aleks Trifunovic, a principal at brokerage Lee & Associates West L.A. Inc. who is familiar with the building, said that could be one reason why the company agreed to pay such a high price for the building.
He added that few buildings have traded hands in Santa Monica since the downturn, because few owners needed – or wanted – to sell. That tends to push up prices in general, but the price for the Clock Tower is also related to its physical characteristics.
“It’s the most unique and desirable in probably all of Santa Monica,” he said. “You get 360-degree views of L.A. and really, for the buildings in the market, you aren’t going to beat it.”
