REALESTATE/27.4 inches/dp1st/mark2nd
By ELIZABETH HAYES
Staff Reporter
A San Fernando Valley doctor is cornering the Mid-Wilshire market.
Dr. David Y. Lee, who has more than 15 office buildings in the struggling submarket, has now acquired a six-story, class-A office building and vacant lot on Shatto Place for $3.5 million. And sources said he is purchasing two more, at 3600 and 3660 Wilshire Blvd.
“I call him a gutsy guy. He’s getting close to 50 percent ownership (of Mid-Wilshire),” said William Lees of the Charles Dunn Co., who represented both the buyer and seller (Frank Dutra Co.) in Lee’s recent purchase a 55,000-square-foot, six-story building at 500 Shatto Place and an 18,000-square-foot lot across the street.
The Wilshire Center’s more than 8 million square feet of office space has one of the steepest vacancy rates in the county, at 27.5 percent, according to Cushman & Wakefield.
“If the market turns, he could raise rents and make money,” Lees said, noting that the steel and brick building on Shatto Place is about 75 percent occupied.
Lee paid the equivalent of $55 per square foot for the building, a good deal compared with many parts of town, but a little higher than most of his Mid-Wilshire purchases, which have been in the $20-$50 per square foot range, said Mike Dunn, executive vice president with Charles Dunn Co.
Lee, a North Hollywood internist, began investing in Mid-Wilshire real estate in the early 1990s and now owns more than 3 million square feet. He’s had some success in raising occupancy rates in his buildings, which include The Towers and Equitable Plaza, which is almost fully leased, Dunn said.
More downtown space
Downtown’s abundance of sublease space, which has been a drag on the market, is about to expand by another 210,000 square feet, thanks to Sempra Energy.
Cushman Realty Corp. will be assisting Sempra in subleasing 160,000 square feet of office space in Library Tower, the equivalent of nine floors, and 50,000 square feet, equivalent to two floors, in the Gas Co. Tower. About 150 Sempra employees in Library Tower will move to the Gas Co. Tower, said company spokesman Mike Mizrahi
“This is part of the company’s original plan to achieve cost savings in real estate once the merger was complete,” Mizrahi said.
The $6.2 billion merger of L.A.-based Pacific Enterprises (the parent of Southern California Gas) and Enova Corp. last June created a new company, Sempra, which is based in San Diego and serves more customers than any other utility in the country.
No workers were laid off in the merger, but 250 positions were relocated to San Diego, Mizrahi said.
Rodeo shopping spree
Anthony Palermo, whose roots on Rodeo Drive go back to 1940, just snapped up another building on the glitzy street for $2,000 per square foot one of the highest prices ever paid for a building there.
“It was my Christmas present to myself,” said Palermo, who is based in Wisconsin. “I bought it because I have a lot of faith in Rodeo Drive. The (properties) have the potential for appreciation.”
Palermo bought the 4,000-square-foot building at 313, 315 and 317 N. Rodeo, which houses Celine, Lalique and BCBG. Palermo now has eight buildings in the 300 block of Rodeo, including one housing the Prada boutique. Palermo said foot traffic along the 300 block is better than other stretches.
It’s also where his family started investing 60 years ago. In 1940, when Rodeo Drive was still a dirt road, Palermo’s uncle and mentor, Gayelord Hauser, bought a lot and built a 4,000-square-foot retail building for a total cost of $39,000 less than $10 per square foot. He later built another 4,000-square-foot building.
Then in 1968, Palermo’s brother, Giancarlo, helped bring a Gucci store to 345 N. Rodeo. A few years later, Anthony Palermo signed designer Hermes for a site at 343 Rodeo.
Chuck Dembo, a partner with Beverly Hills brokerage Dembo & Associates, said rents now run about $16 per square foot on the street, depending on the size of the shop, and vacancies are minimal.
“It’s a good investment for the future. I would have bought it myself if I had the money,” Dembo said of Palermo’s purchase.
Richard Plummer of Cushman & Wakefield handled the sale on behalf of seller Yamashina Co. of Tokyo.
A special Target
National retailers continue to clamor for space in Santa Monica and not just those at the high end of the spectrum.
Target Stores now hopes to build a three-story, 175,000-square-foot store above four levels of underground parking on a 1.5-acre site at the southwest corner of Fifth Street and Santa Monica Boulevard, behind Toys ‘R’ Us.
The project is being developed by Marina del Rey-based Pacifica Capital Group and is now going through the environmental report process with the city. Developers are showing plans to city officials and community groups to get their input while the project is in its formative stage.
Architect David Hibbert said he is working closely with Target’s special projects team to create a flagship West Coast store that will be very different from a conventional Target store. The building will be made of brick and limestone with lots of windows, Hibbert said.
The big-box retailer believes the area is ripe for a store because the closest Target to Santa Monica is in Culver City.
Industrial action
As testament to the continued vibrancy of the central industrial market, two huge deals have closed in Vernon and Commerce in recent weeks.
GE Capital Investment Advisors Inc. has completed what could be the largest acquisition of industrial property in Vernon in the past decade with its $35 million purchase of the Vernon Business Park, a 13-building development encompassing 680,000 square feet.
GE Capital, a San Francisco-based real estate investment advisor, acquired the property on behalf of a pension fund client from Boston-based AEW Capital Management. The 31-acre park is at the intersection of Slauson Avenue and Downey Road, five miles southeast of downtown L.A.
Paul Sablock and Michael Ross of the Seeley Co. represented both GE and AEW.
Sablock said he had 21 offers for the park, which was developed 10 years ago by Trammell Crow Co. and was fully occupied at the time of the sale.
And in the City of Commerce, ProLogis, the largest U.S.-based global owner and operator of distribution facilities, announced the acquisition of a 102,000-square-foot distribution building at 5500 Union Pacific Ave.
Larry Harmsen, market officer for ProLogis in L.A., said the building is one of the only large, dock-high facilities available in the submarket, which has a vacancy rate of less than 4 percent. Peter Bacci with Lee & Associates represented ProLogis and John Privett with CB Richard Ellis represented the seller, E.I. Dupont.
Elizabeth Hayes can be reached at (323) 549-5225 ext. 229.
