The Real Deal wrote about two deals this week that tell different but somewhat similar stories about Los Angeles’ office world: one downtown and another in Silicon Beach.
The latter, a creative office building in Venice, occupied by technology giant Google and designed by the late Frank Gehry, traded for $39.6 million, or about $500 per square foot. The other, an office tower on Bunker Hill, owned by Brookfield, which has defaulted on more than $500 million of debt tied to the property, could trade for $180 million, or about $130 a square foot, if and when a deal that’s currently in the works closes.
There is an obvious difference between downtown and Silicon Beach, not to mention Google and Brookfield. Those are chief among various reasons that one traded for $500 per square foot and the other isn’t close to the $200-per-square foot-mark.
Downtown L.A.’s office market continues to have serious problems — deep enough to raise questions about its future as a commercial hub. It’s been bumping along the bottom for enough time to render a bargain price being bandied about for a Class A tower on Bunker HIll is no surprise.
The $500-per-square-foot for the iconic Binoculars Building does give pause, however, as a reminder that Southern California is still working out its new normal. Industry players estimate the property probably would have traded for $1,000 per square foot before the pandemic, and its current price reveals a reset through the lens of (pun intended) one of the best-known creative office spaces in once desirable areas such as Silicon Beach.
Back in downtown, commercial giant Brookfield, mostly via lenders or receivers, still has other office tower offerings throughout downtown’s Financial District that accounts for about a fifth of Class A office space. Keep an eye on that lineup as it sells off in deals that could set a firm bottom for the market.
Meanwhile, here’s a recap of key details on the recent trade in Silicon Beach and pending deal on Bunker Hill.
- Silicon Beach trade: The Luzzatto Company purchased the three-story, 79,000-square-foot property at 340 Main Street, where a pair of 45-foot-tall binoculars stands, from a W.P. Carey spin-off. Luzzatto received a $24 million loan. The city transfer tax, which includes a special tax via Measure ULA, amounted to more than $2 million.
- Downtown deal talk: 601W is in talks to purchase the mortgage loan on 333 South Grand Avenue, which encompasses Wells Fargo Center — North Tower and the retail spot connected to it, owned by Brookfield, for $180 million, knowledgeable sources said. The deal has not closed, according to an informed source. It appears to be lender-facilitated, and the buyer could then do a deed in lieu of foreclosure.
Some studio solace
Hudson Pacific Properties, Vornado Realty Trust and Blackstone — AKA the joint venture partners behind just-opened Sunset Pier 94 Studios — recently announced a paramount tenant … literally. Paramount Television Studios leased 70,000 square feet to film the second season of Dexter: Resurrection. That’s 30 percent of the 232,000 square feet of leasable stages, production support space and offices. A strong start for the new space, and relative boom compared with Blackstone and Hudson Pacific Properties’ Sunset Glenoaks, which is only 8 percent leased, and was deconsolidated by Victor Coleman’s Los Angeles-based real estate investment trust.
Separately, an $87 million commercial mortgage-backed securities loan secured by an office building in Burbank and owned by Blackstone and Worthe Real Estate Group moved to special servicing for imminent monetary default, Bisnow reported, citing Morningstar data. Its sole tenant, Warner Bros., vacated and it has sat empty since.
Fly away
The $45 million debt on a Marriott-branded hotel, a half a mile away from LAX’s entrance, moved to special servicing for imminent monetary default, according to Morningstar. The hotel, at 5933 West Century Boulevard, appears to be owned by Seaview Investors, which lists the real estate as part of its portfolio online. Seaview’s chief executive Robert Alter is the named loan sponsor, per Morningstar. Servicer commentary via Morningstar only indicates that the special servicer, Rialto Capital Advisors, is reaching out to the borrower. Seaview did not respond to a request for comment.
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