Almost exactly one year after purchasing the former Glendale Federal Bank headquarters building in downtown Glendale, William Wilson & Associates has found a 50,000-square-foot “replacement” anchor tenant.
And no, it’s not one of those big entertainment companies that have been gobbling up Glendale office space and driving up rents over last two years or so.
Actually, the new tenant at the former GlenFed home office tower hails from the industry responsible for putting Glendale’s skyline on the map in the first place the insurance industry.
Reliance Insurance Co., the biggest subsidiary of New York giant Reliance Group Holdings, will expand and relocate its L.A.-area branch office into the top three floors (that’s 11, 12 and 14) of the 13-story building at 700 N. Brand Blvd. (To allay fears of the superstitious, the 13th floor is called the 14th.)
Readers may recall that San Mateo, Calif.-based William Wilson’s Office Opportunity Fund III entered the L.A. market with a splash in February 1996, buying GlenFed’s 1982-vintage former headquarters building for a reported $30 million.
GlenFed had put the 202,316-square-foot property on the market after deciding to relocate its executive offices from the tower’s two luxurious top floors to a nearby “plain vanilla” lowrise facility.
It was clear that tenants shopping for space in downtown Glendale old-line insurance companies and new-wave entertainment firms alike didn’t need the amenities that existed on the old GlenFed tower’s penthouse floors big executive offices (many featuring fireplaces) and an oversized dining room.
So William Wilson “completely demolished” the interior of the top two floors but left the internal staircase. The company also renovated the tower’s lobby and put in new landscaping, said Rob Paratte, a William Wilson vice president.
The Wilson team logically expected interest from tenants in the ever-expanding entertainment industry, and was in discussions with at least two such tenants about the top floors, Paratte said.
But the space was ultimately leased to Philadelphia-based Reliance Insurance, whose local branch offices are currently scattered among three floors at the 16-story tower nearby at 505 N. Brand.
Vice President Victor Feathers of Reliance’s real estate affiliate, Reliance Development Group the one that built and sold 505 Brand as well as downtown L.A.’s 1000 Wilshire tower negotiated the 10-year lease on the tenant’s behalf. William Wilson’s in-house leasing staff represented the landlord.
Feathers noted that Reliance Insurance’s lease at 505 Brand is about to expire, and that the company wanted to consolidate its scattered operations while also expanding its amount of space by about 15 percent.
No financial details of the transaction were disclosed, but downtown Glendale real estate sources said the deal’s effective lease rate is probably around $27 per square foot annually over the 10-year term. That would put the deal’s overall value at between $13 million and $14 million.
Locals buy “core” assets
An investment group headed by local real estate figures Mark Farzan and Fred Afari has purchased a five-building portfolio of neglected office buildings including the former Rapid Transit District headquarters in downtown L.A.’s “historic core.”
The so-called “RTD” complex of interconnected buildings is wrapped by Main, Fourth and Spring streets. Only about 10 percent of the buildings’ combined 450,000 square feet of space is currently leased and the buildings require substantial additional investment to bring them up to marketable standards.
In the portfolio’s favor is the fact that both the City of Los Angeles and State of California have designated the historic core as a preferred site for consolidating offices.
So Farzan and Afari will logically target government agencies as prospective tenants, said Grubb & Ellis Co.’s Ed Rosenthal, who represented the buyers in the purchase negotiations and will handle marketing along with G & E;’s Ray Lepone and John Archibald.
Rosenthal stressed that his clients don’t want the price they paid for the portfolio disclosed. However, another source familiar with the transaction said the buyers paid a bit over $1.5 million which factors to less than $3.50 per square foot.
Another source familiar with the property noted that the RTD had actually been paying more than $2.5 million in annual rent.
Late last year, the painstakingly renovated (yet still mostly vacant) Seventh Street building that had housed the RTD’s former sister agency the Los Angeles County Transportation Commission reportedly sold for closer to $50 per square foot.
Obviously, the RTD investment is not a venture for real estate novices. But as Rosenthal pointed out, Farzan and Afari also own the Chapman Building at Eighth and Broadway, a mixed-use retail/industrial property that’s now 90 percent occupied. That’s a considerable improvement from its 60 percent occupancy level when they purchased the building a year ago.
The Farzan/Afari-led Fourth and Main Associates purchased the RTD complex from Goldman Sachs & Co. affiliate Archon Group.
Dallas-based Archon was formed last year when Goldman Sachs acquired much of the real estate owned by a J.E. Robert Co./Goldman Sachs venture.
John Buck Co. represented Archon in the negotiations with Fourth and Main Associates.