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SK-Earthlink Signs $10 Million Lease for Westwood HQ

SK-Earthlink LLC, a joint venture between South Korea’s SK Telecom Co. and Earthlink Inc., has signed a 50,000-square-foot lease for a new corporate headquarters at 10960 Wilshire Blvd. in Westwood.


The deal with building owner Equity Office Properties is for five years and worth about $10 million, according to sources close to the transaction.


Sources also said that SK-Earthlink, which may change its name in the near future, is negotiating for building-top signage rights.


The venture has become high-profile news in tech quarters. Todd Tappin, who was finance chief for Overture Services though its initial public offering and subsequent sale to Yahoo Inc., has joined with Earthlink founder Sky Dayton to run the company.


Backed with $220 million in capital, SK-Earthlink aims to create one multimedia device combining music, video, data, Wi-Fi and phone service into a single handset. The company is already testing a device being manufactured in Asia.


In response to calls requesting comment about the deal, EOP spokeswoman Paige Steers released a statement confirming the transaction but declining to reveal terms.


As the Westside office market continues to tighten, EOP’s building has seen a rush of recent deals. Sony Pictures Entertainment, online directory InfoSpace Inc., law firm Wood Smith Henning & Berman LLP and USA Today publisher Gannett Co. Inc. recently signed leases totaling 138,987 square feet and worth about $25.5 million.


The leases are filling space left vacant since 2001 when Walt Disney Co. and billionaire Haim Saban sold the Family Channel to News Corp. The deal left a 300,000 square-foot vacancy, leaving the building nearly two-thirds empty.


However, Westwood is on the rebound. At the end of June, the average office vacancy rate had fallen to 16.4 percent from a year-ago level of 22.3 percent, according to Grubb & Ellis Co. And after landlords lowered asking rates at the beginning of the year, rates had risen back by the end of June to the year-ago asking rate of $2.80 a foot.


SK-Earthlink was represented by Matthew Miller of CRESA Partners and EOP was represented internally by David Hitzel, as well as Chris Houge and Rick Buckley of Madison Partners.



Filling Rooms


DiamondRock Hospitality Corp., a Bethesda, Md.-based real estate investment trust, purchased a portfolio of hotels last month that includes the 1,004-room Marriott Los Angeles Airport.


The Marriott Los Angels Airport is the largest hotel to trade hands so far this year, according to Alan Reay, president of Costa Mesa-based Atlas Hospitality Group Inc., who was not involved in the sale.


“What this is showing is just a tremendous amount of activity in the hotel sales market,” Reay said. “We have never seen this many large hotels trade hands in such a short amount of time in Southern California.”


Blackacre Capital Management, a New York real estate investment firm, sold the portfolio of four hotels containing 2,330 rooms to DiamondRock for $315 million.


As part of the deal, DiamondRock receives more than $10 million in cash reserves for capital improvements. The company plans to spend another $5 million to renovate the properties.


Neither Blackacre nor DiamondRock broke out individual sales prices for the hotels. Assuming all rooms are worth the same, DiamondRock is paying about $136 million for the Marriott Los Angeles Airport, Reay said.


DiamondRock is buying into an airport-area market on the upswing. In May, average daily room rates increased 10 percent year-over-year to $83.25, while average occupancy held steady at a little more than 80 percent, according to PKF Consulting, which tracks hotel trends.


Besides the Marriott Los Angeles Airport, the portfolio contains the Renaissance Worthington in Fort Worth, Texas, the Marriott Atlanta Alpharetta in Alpharetta, Ga., and the Frenchman’s Reef & Morning Star Resort in the U.S. Virgin Islands.


The hotels are expected to produce $36.2 million of earnings before interest, taxes, depreciation and amortization by the end of fiscal year 2005, according to an announcement on DiamondRock’s Web site. DiamondRock has a strategic acquisition relationship with Marriott International Inc., which will continue managing the properties.


The Marriott Los Angeles Airport is the second L.A.-area hotel acquisition by Diamond-Rock, which also owns the Torrance Marriott.



On the Block


CARR America Realty Corp. is putting its largest L.A. County office building on the market.


The firm has hired Kevin Shannon, a senior vice president at Grubb & Ellis & Co. to sell its 148,000-square-foot office building at 2600 W. Olive St. in Burbank. Brokers believe that the 10-story building, which has both underground parking and an above-ground garage for parking, could sell in the $40 million range. Shannon didn’t return calls.


After Disney vacated its space about a year ago, the building has been more than 60 percent vacant. Other tenants include Regent Business Centers and Emmis Communications Corp., whose radio stations KZLA-FM (93.9) and KPWR-FM (105.9) are in the building.


Built in 1986, the brown glass building is expected to attract attention from institutional and value-added buyers due to its prominent location in the Burbank Media District.


Recently Burbank has been on a leasing tear. At the end of June, the city’s office market had an average vacancy of 11.2 percent, down from 14.8 percent in the year-ago period, according to Grubb & Ellis.



*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at

afixmer@labusinessjournal.com

.

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