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Weak Rents May Hurt Madison’s Westwood Portfolio

Weak Rents May Hurt Madison’s Westwood Portfolio

Real Estate

by Danny King

Madison Marquette, which has just reached an agreement to sell its Westwood Marketplace retail complex, has retained Colliers Seeley to sell the balance of its Westwood portfolio.

The long-anticipated listing, first reported in the Business Journal in June, includes 10 buildings comprising 180,000 square feet.

The Cincinnati-based firm and its partners, Credit Suisse First Boston and Malibu-based Christina Development Corp., acquired the portfolio for $40 million in 1997 and put an estimated $14 million in the properties.

“Part of our long-term investment strategy was to redevelop and sell the portfolio,” said Joel Mayer, senior vice president at Madison Marquette. “The listing was motivated by our financial partner.”

Officials at Credit Suisse, which sources estimate has a majority stake in the buildings, did not return calls seeking comment.

While Mayer declined to put a price on the portfolio, sources familiar with the properties say they would fetch $50 million, which would represent a loss of as much as $4 million on the sites.

The loss may be attributed to Westwood retail rate’s failure to hit the $4 to $6 range envisioned when the properties were bought, according to Matthew May, president of May Realty Advisors. While retail rents have jumped between 30 percent and 50 percent for other Westside shopping districts like Robertson Boulevard, Sunset Plaza and Third Street Promenade within the past couple years, Westwood’s rates have remained in the $3 range for the past five years.

Mayer estimated a vacancy rate of 2 percent for the predominantly retail properties (versus the 4.5 percent estimate by Bob Walsh, executive director of Westwood Village Community Alliance). Coming on the heels of the firm’s deal to sell the Westwood Marketplace to Teachers Insurance and Annuity Association – College Retirement Equities Fund for an estimated $75 million, Mayer insisted that Madison Marquette was not retreating from the Village.

“We’re staying very active in Westwood,” said Mayer, who noted that Madison Marquette would maintain management duties for Westwood Marketplace and would like to do so for the other buildings. “There’s a chance that this will be a purely financial transaction that would be ideal.”

Yellin Remembered

Developer Ira Yellin was remembered by colleagues, real estate professionals and civic leaders as a visionary and mentor in his two-decade efforts to revitalize downtown Los Angeles.

Yellin, who died last week of lung cancer at the age of 62, was among the early investors looking to revive downtown properties like Grand Central Market and the Bradbury Building. His company, Urban Partners LLC, had been redeveloping downtown’s Herald Examiner Building at the time of his death.

“Ira saw a common ground between the idealistic and the pragmatic,” said Urban Partners Principal Dan Rosenfeld, who co-founded the firm with Yellin in 2000. “Even the big projects like Disney Concert Hall and the Cathedral owe their genesis to the fact that Ira Yellin reestablished the legitimacy to downtown as the civic heart of Los Angeles.”

Yellin, who was raised in Los Angeles, worked for local law firm Rosenfeld Meyer & Susman and served as counsel for developer Hapsmith Co. before forming Yellin Co. in 1985. Within the next four years, Yellin spent $20 million on Grand Central Market, Homer Laughlin Building and Million Dollar Theater on downtown’s upper Broadway, and bought and rehabbed the Bradbury Building for an additional $16 million.

“Ira was truly a great advocate for downtown,” said Eli Broad. “We would talk about the dream he had for downtown. He had visions for it before others did.”

Hammer Time

Los Angeles-based Carpenters Pension Trust submitted a draft environmental impact report to the county last week for a 1.6 million-square-foot industrial park on a 70-acre parcel of vacant, unincorporated land. The project, at Workman Hill Road between Peck and Mission Mill roads, is located between the City of Industry and Whittier and, if approved, could be completed by mid-2004.

“The plan is to create a long-term income-producing investment for the 36,000 families of the CPT in the form of five distribution and industrial buildings,” said Ron Azad, portfolio manager of CB Richard Ellis Investors, CPT’s investment manager. The buildings will range from 80,000 to 610,000 square feet and will be built for lease, according to Azad, who declined to place the cost of the build-out.

CPT bought the property in 1999 from Rose Hills Memorial Park, which is across the street from the site. Though Azad would not disclose the purchase price, the unentitled property was marketed at $6 a foot, or $18.3 million, according to Phil Lombardo, a principal at Trammell Crow Co.

Multi-Million-Dollar View

Warmington Homes has closed on the first of a four-phased purchase of Rancho Palos Verdes land for luxury home development. The Costa Mesa-based homebuilder, which paid $1.7 million for two half-acre lots, has a deal to acquire 10 acres for $20 million over the next 12 months, with plans to develop 20 high-end homes on the site.

The property, near the intersection of Palos Verdes Drive West and Hawthorne Boulevard, overlooks the Pacific. It is being sold by a joint venture of Makar Properties and Capital Pacific Homes, which had graded the properties and installed streets for the future community.

Staff reporter Danny King can be reached at (323) 549-5225 ext. 230, or at

dking@labusinessjournal.com.

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