Wilshire/jas/25″1stjc/mark2nd
By JULIE SABLE
Staff Reporter
It was another mixed quarter for the Wilshire Corridor.
Two major property owners Zufu Property Co. Ltd. and a partnership headed by Lewis P. Geyser and Jerome Snyder filed for protection under Chapter 11 of the federal bankruptcy laws.
Zufu, whose parent company is based in Hong Kong, sought Chapter 11 protection in December after mortgage holder Teachers Insurance & Annuity Association initiated a foreclosure action.
Zufu owns five buildings in the area, including the 718,000-square foot Central Plaza complex at 3440 through 3470 Wilshire.
The Wilshire Courtyard partnership of Geyser and Snyder owns the 967,000-square foot Wilshire Courtyard complex in the Miracle Mile district. Geyser and Snyder filed for Chapter 11 bankruptcy protection after Bank of America sought to foreclose. Total mortgage debt on the complex (including first and second loans) was over $300 million when the owners filed bankruptcy in January.
Despite the bankruptcy filings, commercial real estate brokers who work the Wilshire Corridor remain optimistic, noting the area’s reputation as a kind of “Hollywood South” home of entertainment companies such as the E! Entertainment Television and Aaron Spelling Productions.
Chris Runyen, a senior associate at Grubb & Ellis Commercial Real Estate Co., said that Capitol Records agreed recently to lease 45,000 square feet in the Wilshire Courtyard.
A Capitol spokeswoman said the company’s catalog department will be locating in the Miracle Mile quarters, but other operations will remain in Hollywood.
Overall, the Miracle Mile/Park Mile district saw a negative absorption of 83,000 square feet of leased space during the quarter that’s the amount of additional space that came on the market because of tenants moving out.
The first quarter was also marked by Bank of America closing its Museum Square branch near the La Brea tar pits.
Cliff Goldstein, a partner at Miracle Mile-based J.H. Snyder Co., said the bank will be replaced by restaurant-retail uses.
“Koo Koo Roo has signed a letter of intent and we are negotiating with a major bagel operator and coffee and juice retailer at this time,” he said.
“What is interesting is the increase in retail activity in the Miracle Mile, since it has been somewhat disappointing in the past,” Goldstein said.
Farther east, Park Mile continues to drag down Miracle Mile, Goldstein said, as the neighborhood will probably never see much commercial leasing because of zoning restrictions.
In an effort to keep highrises and parking structures out, he said, residents of the Hancock Park area lobbied for the restrictions that have been in place for years. Park Mile serves more as a buffer than an office market.
The office vacancy rate for the combined Miracle/Park Mile area stood at 23.2 percent at the end of the first quarter, up slightly from 22.2 percent for the like period a year ago.
The news was more positive in the Mid-Wilshire District, where there was a net absorption of 69,302 square feet.
Contributing to the good numbers was activity at the 330,000-square-foot Wilshire Park Place at 3700 Wilshire, purchased by David Lee in October.
The building was only half full at the time of purchase, but “since then, Dr. Lee has been doing very aggressive deals and the building is now almost maxxed out at 90 percent full,” said Runyen.
The vacancy rate stood at 26.8 percent in the first quarter, down from 29.5 percent for the like period a year ago.
The Mid-Wilshire area is benefiting from the rising tide on the Westside, according to Goldstein. “Rents are increasing in the Mid-Wilshire area because rents are rising in the Westside,” he said.
Rental rates are between 90 cents and $1.30 in the Mid-Wilshire area; between $1.10 and $1.30 in the Park Mile area; and from $1.40 to $2 a square foot in the Miracle Mile area.
“We are talking to tenants in the Beverly Hills area, which we did in the 1980s when the Westside rents increased,” Goldstein said. “Once again, they are moving east into the Miracle Mile.”
Rents are approaching $2 a square foot at Wilshire Courtyard, a rate that Goldstein said he could not have obtained four months ago.
The E! Entertainment tower at 5670 Wilshire is virtually 100 percent leased, and Goldstein said he is discussing the construction of studio space for the entertainment company.
Goldstein said he also is negotiating the relocation of a Hollywood entertainment company into 15,000 square feet in the Museum Square building.
With scant Class A space available in Hollywood, entertainment companies are beginning to look south to the Miracle Mile as they expand and need more space.
Mid-Wilshire Major Events
– Zufu Properties Co. Ltd., which owns 1.1 million square feet of Mid-Wilshire highrises, sought Chapter 11 bankruptcy protection in December after its mortgage lender initiated a foreclosure.
– The Courtyard complex filed for Chapter 11 bankruptcy protection of the 967,000-square-foot building after Bank of America sought to foreclose.
– Koo Koo Roo signs letter of intent for 5,000 square feet at 5757 Wilshire, the site of the recently-closed branch of Bank of America.
– Computer Learning Centers Inc. relocates from 3130 Wilshire to 47,000 square feet on the ground, second and fourth floors of the Paramount Plaza complex, 3550-3580 Wilshire.
– Capitol Records is preparing to lease 45,000 square feet at the Wilshire Courtyard’s 5750 Wilshire building.
