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The Real Deal Los Angeles

Edward Minskoff on why his big bet on Playa Vista will pay off

NYC developer said he sees expiration of Fox lease as his biggest asset

August 22, 2016 11:30AM
By Katherine Clarke

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Edward Minskoff and the Bluffs at Playa Vista

Edward Minskoff and the Bluffs at Playa Vista

New York developer Edward Minskoff recently went into contract to buy the Bluffs at Playa Vista creative office campus from JPMorgan for an undisclosed price rumored to be in the ballpark of $400 million. The deal for the buildings, at 12121 and 12181 Bluff Creek Drive, is expected to close in October.

Local industry insiders have described the deal as somewhat risky, since the 500,000-square foot complex is occupied by a single tenant, Fox Interactive Media, whose lease expires in 2021. The departure of the company could leave Minskoff with a lot of empty space to fill. The property is not far from the the “Spruce Goose” hangar, where tech giant Google recently leased space for its L.A. offices.

The Real Deal sat down with the developer, whose firm owns and manages almost six million square feet of office, retail and residential space nationwide, to talk about the risk associated with the property and whether he plans to court Google as a prospective tenant. 

Why did you like this deal?

We’re very excited about the asset, since they’re first class, A-quality office buildings in one of the hottest markets in California right now. You have Google that’s committed to retrofit the Spruce Goose building with over half a million square feet of brand new office space and that’s about 50 feet from our front door. They also have a parcel of land just as close that they have fully entitled for almost 900,000 square feet. They’re making a huge commitment to this part of Southern California.

So, you’re hoping there’s going to be a spillover effect?
We just think that when our lease with Fox expires in 2021, there won’t be any A quality space left in the vicinity to compete with.

Are you thinking Google might be a potential tenant for you?
We’re not counting on that but you never know with them. Their growth is so intense. Look what they’ve done in New York — they have over 2 million square feet. It’s been a magnet for other companies in the tech industry to be close by. Our building could be part of their campus or they could ignore it and it won’t be part of their campus.

What are you paying, exactly?
We won’t disclose those financials.

People were saying that the expiration of the Fox lease was a potential risk, but you seem to see it more as an opportunity…
I look at it as a big asset for us because Fox doesn’t have any options to renew. Instead of having to wait 12 or 18 months prior to the expiration to find out whether they’ll renew, we can start marketing the space the day after we close. We have five years to market the space.

Is there a lot of upside to be had in terms of rents?
Yes. The rents have been increasing almost annually in that area. I don’t have a crystal ball to predict what they’ll be, but I foresee rents increasing in the next five years to levels equivalent to what they’re getting in Santa Monica, which is about $6.50 a square foot on a monthly basis.

Are you planning to invest more money into upgrading the complex?
We’re going to be making some interesting upgrades, mainly to do with landscaping, the lobby and adding a lot of art work. We have a very exciting plan to work with two different artists to do something uplifting. We’re going through all the budgeting of those upgrades right now.

Who are the artists?
I don’t know if I should say. We have two committed that want to do it.

Are they big names?
Oh yeah, absolutely.

How are you financing the purchase?
Conventional financing plus equity.

This isn’t your first foray into the L.A. market….
When I was CEO of Olympia & York, I built 400 South Hope in Downtown and then I built 11601 Wilshire, which is a 550,000 square foot office building. They were done in the 1980s.

Why did you wait so long to return?
I grew up in Southern California so it’s like a second home. We’ve been looking for a long time and are continuing to look. We’ll potentially be developing as well.

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