A new high water mark for L.A. office space is official. Fox Plaza closed escrow last week, cementing a deal in which Donald Bren’s Irvine Co. bought the trophy building for about $350 million, or almost $500 per square foot, a per-square-foot high, sources said.
The fully leased building went for $65 million more than Marvin Davis paid for it in 1997, sources said.
Even as the price went up and monthly rents rose to $3.85 per square foot, the number of tenants has actually decreased as those there have expanded their space within the trophy building. When the building first leased up in 1987 there were more than 20 tenants. Today, there are eight.
That trend is likely to continue, based on the interest that tenants have shown, said Jeffrey Strnad, senior vice president of DLJ Realty Services Inc. Strnad has been associated with leasing the building since the mid-1990s.
“Market rents are still growing and, at some point, you maintain tenants that can pay top (rates),” Strnad said. “It will ultimately become a two-, three-tenant building.”
Tenants include Goldman Sachs & Co., Fox Entertainment Group (which started with two floors in 1986 and in March signed a 15-year lease for 15 floors, or approximately 315,000 square feet), Donaldson Lufkin & Jenrette Securities Corp. (which over the years has expanded from one floor to five) and two law firms Christiansen, Miller, Fink, Jacobs, Glasser, Weil & Shapiro and Jeffer, Mangels, Butler & Marmaro LLP.
Six of the eight tenants have been in the 710,000-square-foot Fox Plaza since 1987.
Torrance Startup
Ledgent Inc., an online accounting and human resources service firm, has signed a sublease deal structured specifically for its status as a start-up company.
The company has agreed to sublease a Torrance office building from Standard Communications in a series of three must-take expansions over 18 months. The venture-backed firm now occupies 5,000 square feet and will eventually take over the entire 54,188-square-foot building at 1111 Knox St. by the end of 2001.
It’s not a typical arrangement, but it works well for the startup as it makes more hires, said David M. Kluth of Julien J. Studley Inc., who represented Ledgent in the deal.
“The lease is set up so that, as projected growth occurs, additional space will be taken down by Ledgent in a fashion that mirrors growth,” Kluth said. “They don’t pay for it while they don’t occupy it.”
Chris Reigel of Cresa Partners represented Standard Communications.
Burbank Deal
Payroll company Cast & Crew Entertainment Services has doubled the size of its Burbank offices, moving closer to downtown Burbank in a 10-year deal for 23,500 square feet at 100 E. Tujunga Ave. The lease is valued in excess of $5.5 million.
The company is moving into the top of a two-story building, a space formerly occupied by a health services company. The building is owned by Cusumano Real Estate Group.
Cast & Crew, formerly located on Burbank Boulevard, handles payroll for major studios, television networks and production companies.
Scott Katcher, managing director at Julien J. Studley, and Len Nandler, senior managing director at Julien J. Studley, represented the tenant in the deal.
San Fernando’s High Hopes
Officials with the city of San Fernando hope Zelman Development Co. can do for them on a smaller scale what the company is doing for Burbank at the former 103-acre Lockheed Martin Corp. property: bring in retailers.
Zelman is in exclusive negotiations with San Fernando to find a major retailer to anchor a 170,500-square-foot retail project on 12 acres in the city’s northern downtown area, which today is mostly a hodgepodge of car repair facilities, said City Administrator John A. Ornelas.
Early proposals call for a 143,500-square-foot anchor.
A Home Depot has been in San Fernando for 14 years, but there hasn’t been much other interest from retailers, Ornelas said. To his knowledge, the nearest Target store is in Granada Hills.
“I think (that difficulty with attracting anchor retailers) is typical for inner cities and areas that are considered probably working-class communities,” Ornelas said. “Historically, those places are the last areas that retailers locate.”
Zelman company officials are talking to Target, Wal-Mart which recently announced a massive expansion plan and other major retailers, Ornelas said. Zelman officials were not available for comment.
High Rents, High Prices
There’s no shortage of examples of L.A.’s rising rents pushing up the price of apartment buildings.
In West L.A., TriCal Construction Co. recently sold a five-building, 176-unit portfolio for near its list price of $43.3 million. TriCal built the complexes in the past year and sold them to an institutional investor.
“A lot of people were very surprised when we came out with the properties on the market (at that listing price),” said Laurie Lustig-Bower, senior vice president at CB Richard Ellis. “Even while we were in escrow, the rents kept climbing.”
In North Hollywood, Jeff Greene, an individual investor, bought 184 apartment units from longtime owners in a three-building, $10.2-million transaction. Brokers said the price, which works out to $55,435 per unit for mostly one-bedroom units, was previously unheard of in that market.
The family that owned the buildings bought them 10 years ago and waited for prices to return to their previous levels. The properties were built in 1979, 1980 and 1981, after the 1978 cut-off date for rent control.
“There was upside in the deal because the rents were at a point where they were ready to be raised,” Lustig-Bower said.
She agreed that the tight housing market has brought new highs in selling prices.
Change at CB Richard Ellis
CB Richard Ellis has brought on real estate finance executive James H. Leonetti as its new chief financial officer.
Leonetti was CFO at Long Beach Mortgage Co., a specialty finance firm that handled loans in excess of $3 billion in 1999. He served previously as senior vice president and controller for California Federal Bank and assistant controller for FarWest Financial Corp.
Staff reporter Milo Peinemann can be reached at [email protected].
