Investor Dwells on Downtown in $40 Million Deal

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West L.A. real estate investment trust Hudson Pacific Properties Inc. is on a buying spree in downtown L.A.’s Arts District.

Three months after it acquired the former Coca-Cola manufacturing plant at 963 E. Fourth St., the firm purchased a portfolio of three properties one block away in a deal that closed last week.

The properties, which total roughly 83,000 square feet, make up an entire square block bounded by East Fourth, Molino and Mateo streets, and Fourth Place, less one parcel. While the price was not disclosed, real estate sources said the portfolio was valued at approximately $40 million.

Hudson approached the seller, Santa Monica’s ZDI Inc., with an unsolicited offer it couldn’t refuse, said ZDI President Steve Zimmerman.

All three buildings are vacant. ZDI had upgraded the 57,000-square-foot property at 405 S. Mateo, which Hudson will likely redevelop as creative office. ZDI also renovated the building at 1019 E. Fourth Place, which will likely be leased to a restaurant tenant. The third property, at 1003 E. Fourth Place, was not renovated and will likely be used as a parking lot.

The parcels are a block from the former Coca-Cola plant, dubbed Fourth & Traction, which Hudson acquired in late May for $49 million from a partnership of Goldstein Plating Investments and Atlas Capital Group.

“We’ve assembled a small but significant foothold, approximately 200,000 square feet, in what is rapidly becoming one of the hottest micromarkets for creative space in the country,” said Victor Coleman, Hudson Pacific’s chief executive.

Coleman had also expressed enthusiasm for the area during an earnings call Aug. 6.

“I mean, look, the Arts District is approaching almost Beverly Hills-type rental rates,” he said on the call. “We’ve got over a million feet of interest for both retail and office in that area. … So the square-footage demand and the returns are going to be completely different than what we consider as a downtown Los Angeles marketplace.”

Mike Smith and Ron Young of Lee & Associates represented ZDI in the sale.

Hustling Away

Hustler’s retail store at 8920 W. Sunset Blvd. in West Hollywood will soon pack up its sex toys and move.

Larry Flynt Publications, a Beverly Hills adult entertainment empire founded by Larry Flynt that owned the building, closed on the $18.3 million sale to New York firm VE Equities last month.

The 20,500-square-foot mixed-use building traded for roughly $900 a square foot.

VE plans to develop a mixed-use property on the site as part of a joint-venture project with investment and development firm London & Regional Properties and private membership club Arts Club, both of London, said Zachary Vella, who heads VE along with Justin Ehrlich.

Actress Gwyneth Paltrow is a minority partner in Arts Club and, it was reported in April, will be directly involved with opening a private members club on the site, similar to the Arts Club locations in London and Aspen, Colo. London’s Arts Club charges an initiation fee of $2,000 plus annual dues of $2,000.

The balance of the property will likely be a hotel, Vella said.

“Ground-up development is our intention but we have to see what the city approves,” he said.

The partners have proposed a 164-room hotel with four residential units, which will go before the West Hollywood Planning Commission for a decision this fall, said Jennifer Alkire, a senior planner for the city.

Larry Flynt Publications felt the offer from VE was too good to turn down, said Arthur Sando, head of communications for the company.

The 10,250-square-foot Hustler store will downsize and move to a 6,000-square-foot retail storefront in Hollywood at 6538 Hollywood Blvd. later this year.

Flynt bought the property in 1998 for $4.7 million, or $230 a square foot.

It is the latest divesture for the media mogul, who in 2013 sold his Beverly Hills headquarters building at 8484 Wilshire Blvd. to Santa Monica real estate investment trust Douglas Emmett Inc. for roughly $80 million.

Larry Flynt Publications agreed to a 10-year lease as part of that deal.

Moving On Up

Newmark Grubb Knight Frank has hired Lynn Kious as senior managing director in its downtown L.A. office, where she will focus on tenant representation. Kious joins the firm from Johnson Controls Inc. where she served as vice president and general manager of global real estate and workplace services. She was formerly vice president of global real estate for Walt Disney Co. … Jones Lang LaSalle Inc. has named Tony Morales brokerage lead in the L.A. region, overseeing a team of approximately 80 brokers across six offices. He’s been with the company for 25 years.

Staff reporter Hannah Miet can be reached at [email protected] or at (323) 549-5225, ext. 228.

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