Even though Glendale has one of the weakest office markets north of the Santa Monica (10) Freeway, ING Clarion Partners is making a $140 million wager that the city will bounce back.
The real estate investment arm of Dutch banking giant ING Groep N.V. is buying the 419,000-square-foot office building at 500 N. Brand Blvd. in downtown Glendale. ING Clarion is paying about $334 a foot for the 15-year-old tower.
Office buildings in the city the third largest by population in L.A. County have dragged behind neighboring markets of Pasadena and Burbank in both occupancy and rents.
Glendale has struggled as some of its largest tenants such as Disney Stores, Nestl & #233; USA Inc. and Fremont Indemnity Co. either downsized, relocated or closed. Even ING Clarion’s building has a 20 percent vacancy rate, a level that’s far above the L.A. County average of 11 percent.
Still, Mike McCann, ING Clarion’s senior vice president of acquisitions, said the city’s high vacancy is the result of a streak of bad luck.
“Glendale is taking it on the chin a little bit from a perception standpoint,” McCann said. “Glendale’s problems are a result of bad luck and not because Glendale is dysfunctional.”
ING Clarion is betting that companies squeezed out of maxed-out office markets in Burbank and Pasadena will begin moving to Glendale, when rents will rise. “We see a lot more upside in that market than Pasadena and Burbank,” McCann said.
McCann believes Glendale’s office market also could benefit from mall developer Rick Caruso’s “Americana at Brand” project, which is set to start construction. The development is similar to Caruso’s wildly successful Grove at the Farmers Market on Third Street in Los Angeles except that “Americana at Brand” will also include condominiums.
ING Clarion is buying 500 N. Brand from a joint venture affiliated with GE Pension Trust, which built the 22-story tower in 1990. The L.A. County Assessor’s office listed a December 1988 recording date for the building, which it valued at $105 million.
Both buyer and seller were represented by Eastdil Secured’s Jay Borzi, Steve Silk and Stephen Somer.
Forget Residential
While a number of Hollywood buildings are being converted into condominiums, CIM Group Inc. has shifted its attention to building high-end office space.
The group is close to a deal to buy the 75,000-square-foot Security Pacific building at the northeast corner of Hollywood Boulevard and Cahuenga Avenue from the Bolour Trust for $16 million, or $213 a foot. Michel Bolour declined to comment on the transaction.
Hollywood-based CIM Group plans to extensively renovate and reposition the 83-year-old building and recruit a restaurant or shop to take over the large ground-floor space.
“This could be a very high-end office building for small businesses,” said Shaul Kuba, a CIM Group principal. “We want to try to get the small business that wants to be in Hollywood and not just use Hollywood for cheap space.”
The Security Pacific building, located at 6381 Hollywood Blvd., brings to four the number of significant office buildings CIM Group owns in Hollywood.
CIM Group has some experience with repositioning older Hollywood office buildings. One of the company’s first projects in Hollywood was remodeling and renovating the Woolworth building at 6410 Hollywood Blvd., which the company sold four years ago.
Since then, CIM Group purchased the TV Guide building at 6922 Hollywood Blvd., which it remodeled and repositioned, the Stephen J. Cannell building at 7080 Hollywood Blvd., which is 100 percent leased, and an office building at 1800 Highland Ave., that’s in the midst of an extensive remodeling.
CIM Group is also working with the Community Redevelopment Agency on a new office building near Highland and Hawthorne avenues.
“We are making a huge bet on Hollywood office space,” Kuba said.
It’s a bet that could pay off. Due to residential conversions, Hollywood’s office space has been shrinking. That has pushed up rents and suppressed vacancy rates.
Hollywood’s office vacancy rate is near single digits and rents have gone up 4 percent in the last year, according to Grubb & Ellis Co. With no new office space expected to come onto the market in the next five years, rents and occupancy levels could continue to rise.
“The market itself hasn’t seen any growth in the last 30 years,” Kuba said, “and businesses coming back to Hollywood are having trouble finding good quality space.”
Marquee Deal
Lions Gate Entertainment Corp. renewed and expanded its Santa Monica headquarters in a $13.4 million deal.
The independent film producer and distributor agreed to a five-year lease for 85,225 square feet at 2700 Colorado Ave. in Santa Monica. That represents an expansion of 31,500 square feet.
Lions Gate needed the extra space because of a growing film business from recent hits such as “Crash” and “Saw.” The company is also expanding through acquisitions. Lions Gate bought indie film rival Artisan Entertainment two years ago for $160 million.
Lions Gate also houses at the same site its TV unit, Lions Gate Television Corp., which produces shows such as “The Dead Zone.”
Hunt Barnett, a principal at Madison Partners, represented the landlord, TMW Management LLC. Lions Gate was represented by Lawson Martin and Jim Travers of Travers Realty.
Brand Name
Some law firms shorten long names. Allen Matkins is going the opposite direction.
The real estate powerhouse is promoting Tony Natsis to name partner. As a result, the firm, which had been Allen Matkins Leck Gamble & Mallory, will now go by the official name of Allen Matkins Leck Gamble Mallory & Natsis LLP.
Natsis has been a partner at the firm and co-chairman of the firm’s Commercial Project Group, where he has been in the middle of some of the L.A. region’s largest lease and sale transactions.
“This is probably the greatest honor in my legal career because of the guys who I’m joining on the door,” Natsis said. “If you look at their reputation and stature, it’s pretty dramatic.”
*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at
[email protected]
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