J&L Realty Partners has purchased a 39,248-square-foot office building in Hollywood for $23 million.
The property, at 1777 Vine Street, is directly across the street from the Capitol Records building and on the Hollywood Walk of Fame.
It is currently fully occupied by the seller, AMDA College of the Performing Arts, which sold the property under a sale-leaseback agreement.
The college’s lease is for 18 years.
A sale-leaseback occurs when a company or individual sells a property and immediately leases it back. This benefits the seller, who gets a cash influx from the sale while being able to remain at the current location. Buyers benefit by being able to own valuable real estate with a tenant already in place.
Avison Young’s Chris Bonbright and Chase Gordon represented AMDA in the transaction. J&L Realty Partners was represented by Sotheby’s International Realty’s Craig White.
“This is an operating asset for AMDA,” Bonbright said. “It has classrooms, studios, a theater space. It’s part of their day-to-day business of teaching performing arts. It only made sense to continue to operate out of this facility.
“A sale leaseback is a tool that almost every corporation uses as a financing vehicle,” he added. “If you’re looking for capital for growth, you look at your various options, and the cost of real estate is frequently the least expensive and they have a lot of real estate. It was an easy way to access capital.”
The property was built in 1962 and renovated in 2014. It has nearly 70 parking spaces.
Gordon said the buyer, J&L Realty Partners, is “bringing funds out of Southeast Asia and is looking for core, leased office assets in the Southern California area.”
Its principals, he added, formerly worked for Oue Ltd., which owned the U.S. Bank Building before selling it to Silverstein Properties Inc. for $430 million in 2020.
“They have experience and realized the valuable nature of this real estate,” Gordon said.
He added that, despite a challenging office market, there was still demand for assets leased to good tenants and in areas like Hollywood.
He said that despite giving some space back, Netflix Inc. was still a giant in the market, which brought other companies to the area and attracted investors.
In the first quarter, the Hollywood submarket saw asking rents of $5.19 a square foot, up 6 cents over the previous quarter, according to data from Jones Lang LaSalle Inc. The $5.19 a square foot is $1 higher than the county average of $4.19 a square foot, according to JLL data. The brokerage also found that Hollywood was one of a few submarkets to see positive net absorption during the first quarter.
“While clearly it’s a choppy time and there’s a lot of uncertainty in commercial real estate in general, for a number of reasons Hollywood still seems to have a special interest, especially to foreign inventors and out-of-state investors,” Bonbright said. “A lot of that relates to the logic about why Hollywood has been as successful as it has been over the last 20 years.”
Those reasons include its location, density and access to public transit, he said.
Bonbright said that going forward he expects to see interest in secure, long-term investments in assets.