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Tag: LA Office Market

  • Douglas Elliman Wants to Sublease Beverly Hills Offices

    Douglas Elliman Wants to Sublease Beverly Hills Offices

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    Douglas Elliman wants to sublease about 10,800 square feet of its office in Beverly Hills in an effort to consolidate its operations there. 

    The brokerage has tapped its commercial branch to list two floors at 150 South El Camino Drive for sublease, according to social media posts from Douglas Elliman Commercial agent Jason Froehlich. 

    The company is looking for about $5 a square foot a month, or about $54,000 a month, for the two-floor space. 

    “Owing to underutilized area in our Beverly Hills office, we are consolidating our operations exclusively to the third floor of 150 El Camino Drive, giving us one cohesive space to collaborate with our colleagues and agents,” a representative for Douglas Elliman said in a statement. 

    Kennedy Wilson owns the roughly 60,000-square-foot building, records show. 

    The office has served as the headquarters for Douglas Elliman California and previously housed 300 agents, according to the firm’s website. 

    Douglas Elliman has worked to reduce its office space since 2020 when the pandemic hit. It was still working to reduce office space last year in an effort to cut costs. However, according to financial filings, Douglas Elliman has not dramatically reduced expenses. It spent $125 million on general and administrative expenses in 2023, down from $131 million in 2022.

    The average monthly asking rent during the first quarters for a Beverly Hills office was $5.20 per square foot, according to a report from brokerage CBRE. For Class A offices, the number increased to $5.45 per square foot.

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    Isabella Farr

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  • Hudson Pacific Reports Big Losses as Office Income Shrinks

    Hudson Pacific Reports Big Losses as Office Income Shrinks

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    Hudson Pacific Properties is feeling the burn of withering office markets. 

    The Los Angeles-based real estate investment trust lost $52 million in the first quarter, up 160 percent from its $20.4 million loss reported in the same period last year, according to an earnings release on Wednesday. 

    The reason: Hudson Pacific harvests less and less revenue from its office properties. 

    Vacancy “remains stubbornly high as many existing tenants continue to downsize,” CEO Victor Coleman said on a call Thursday discussing the firm’s quarterly earnings. 

    The company reeled in $175 million in revenues from its office portfolio from January through March, down roughly 15 percent from the first quarter of 2023, financial filings show. 

    Its office portfolio was 78 percent occupied on average in the first three months of this year, down from 85 percent a year prior. 

    Hudson Pacific is looking to sell three office buildings totaling around 900,000 square feet, or roughly 8 percent of its office portfolio, Coleman said on the call. The firm did not identify which buildings it was looking to shed. 

    The San Francisco Bay Area is causing the most pain for the company in terms of vacancy — its portfolio there was 74 percent leased on average in the first quarter. 

    The leasing is uneven, too. One building, Skyport Plaza in North San Jose, was 6 percent occupied, while others including 3400 Hillview Avenue, were 100 percent leased.

    On some buildings, Hudson Pacific is still bullish. At 1455 Market Street, where the firm just signed the City of San Francisco to a 157,000-square-foot lease, the firm paid $43.5 million for a 45 percent interest in the building, the firm said on Wednesday. 

    Over the past few years, Hudson Pacific has relied on its movie studio portfolio to boost revenues, given the uncertainty around the office sector. 

    But, with two sweeping strikes that hit the entertainment industry, Hudson Pacific is in recovery mode on those assets, too. 

    Revenues from its studio portfolio — about 10 percent of all its holdings — have shrunk 15 percent over the last year, financial filings show. In November, the firm was expecting a “tremendous upswing” when filming resumed, but hasn’t seen it yet. 

    “The film and television industry has recovered far more slowly than anticipated,” Coleman said, though he remained hopeful. “There is no question that high-quality, original content will remain essential for the studios growing their subscriber bases and building valuable IP.”

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    Isabella Farr

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  • Jade Enterprises Lists Mostly Empty LA Building for Sale

    Jade Enterprises Lists Mostly Empty LA Building for Sale

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    Jade Enterprises has listed a mostly vacant office tower in Downtown Los Angeles for sale. 

    The L.A.-based investment firm has put 660 South Figueroa Street, a 24-story, 284,500-square-foot tower, on the market, according to a LoopNet listing. A team led by Newmark’s Kevin Shannon is marketing the property for sale. 

    No listing price was disclosed, though the deal would be a “significant” discount to what it could cost to replace the entire building — estimated to be more than $900 a square foot, or roughly $256 million. 

    Jade bought the property for $80 million in 2014, or roughly $281 a square foot, records show. The firm used a $55.4 million loan from U.S. Bank for the acquisition and refinanced with a $51.5 million loan from Acore Capital. 

    The balance of the loan has shrunk to $39 million. Jade is offering the buyer a deal to assume the loan, which matures in February 2027, with the acquisition.

    Jade has spent $12 million over the last 10 years to renovate the building’s common areas and on tenant improvements, according to the listing. 

    The property is currently 37 percent leased — and about 12 percent of that is set to expire before 2027. No leases are scheduled to expire this year. 

    Offices in Downtown Los Angeles have been trading well below what Jade paid for the building in 2018, impacted by high interest rates and the City of L.A.’s transfer taxes, known as Measure ULA. 

    Earlier this month, The Swig Company sold an office complex at 617 West 7th Street for $20.5 million, or $94 a square foot, marking one of the lowest deals on a square-foot basis for an office property in the Downtown market. 

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    Isabella Farr

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  • Starwood, Artisan Default on El Segundo Office Loan

    Starwood, Artisan Default on El Segundo Office Loan

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    Starwood Capital and Artisan Ventures are on the brink of losing a 257,000-square-foot office building in El Segundo, The Real Deal has learned. 

    The firms have defaulted on an $84.8 million loan from MetLife Investment Management tied to the property, located at 1960 East Grand Avenue, according to a notice of default filed with L.A. County last month. 

    Starwood and Artisan, formerly known as Artisan Realty Advisors, is $960,800 behind on the loan, as of Jan. 25. Neither company responded to requests for comment. 

    The duo failed to “cure a covenant breach” and failed to pay default interest, among other things, all of which triggered a default. 

    MetLife provided the loan in 2020, records show, to finance Starwood and Artisan’s acquisition of the building and a neighboring parking lot for $133 million. The firms bought the property from Brookfield. 

    In 2022, Artisan and Starwood planned to redevelop the parking lot into 94,000 square feet of office space and a four-level parking structure, according to documents filed with the city of El Segundo’s planning department. The plans, however, were only in the beginning stages. 

    About 70 percent of 1960 East Grand Avenue is leased, according to online listings for the property. 

    The default comes after reports that Starwood and Artisan are in talks with another lender, Morgan Stanley, over $500 million in debt tied to the Pacific Coast Tower next door. 

    The companies are still in negotiations to extend or forgive the debt, to avoid default, according to sources familiar with the matter, given the office complexes are struggling with occupancy issues.  

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    Isabella Farr

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  • Plastic Surgeon Buys Beverly Hills Offices for $21M

    Plastic Surgeon Buys Beverly Hills Offices for $21M

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    A social media-famous plastic surgeon has bought an office building in Beverly Hills for about $921 a square foot, one of the priciest office deals in the last year on a per square foot basis. 

    Daniel Barrett, who runs Barrett Plastic Surgery and has almost 1 million followers on Instagram, bought 501 South Beverly Drive for $21.3 million, according to property records. 

    Ray Rowshankhah, the founder of Del Ray Realty, arranged financing for the deal, while Brandon Michaels at Marcus & Millichap represented the buyer. 

    Alon Abady, who owns a number of office buildings and hotels across Beverly Hills and West L.A., sold the building after owning it for more than 20 years, records show. 

    Barrett plans to build out about half of the building into medical space, fit for a surgery center with operating rooms and a medical spa, he confirmed over email. The remainder of the building would be leased out to tenants. 

    To close the deal, Barrett scored a $13.75 million loan from First Citizens Bank and more than $4 million in financing through the Small Business Administration’s 504 loan program, according to Rowshankhah. 

    In total, the deal was about 85 percent loan-to-value — terms that surpassed “usual market offerings for a commercial loan of this caliber,” Rowshankhah said. 

    Beverly Hills is a bright spot for L.A.’s office market, with a handful of deals trading for more than $900 a square foot in recent months, compared to Downtown Los Angeles, where office towers have traded for less than $140 a square foot. 

    Last month, sports betting company FanDuel paid $71 million for a 50,200-square-foot office building at 9000 Wilshire Boulevard, coming to $1,410 per square foot. 

    In a report from CBRE that looked specifically at the L.A. medical office market, the average price per square foot for the first three quarters of last year was about $360, compared to more than $600 for all of 2022. The average asking rate for medical office leases was $5.56, well above the L.A. market average of $3.86, but trailing pricey West Hollywood, Santa Monica and Westwood.

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    Isabella Farr

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  • CalSTRS scores $70M Refinance on West LA Office Building

    CalSTRS scores $70M Refinance on West LA Office Building

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    Not all office buildings have trouble finding new money. 

    The California State Teachers’ Retirement System has scored a $70 million loan to refinance its 337,400-square-foot office building at 11755 Wilshire Boulevard, according to property records filed with Los Angeles County. 

    Wells Fargo Bank provided the senior mortgage — of which $51.5 million is slated to be packaged into a commercial mortgage-backed securities deal, according to a KBRA report and Trepp data. The CMBS pool, expected to total about $519 million, is set to close next month. 

    The loan, which expires in 2029, was used to pay off previous debt from Northwestern Mutual, according to KBRA. CalSTRS also put in about $960,000 to help pay off the loan and fund reserves for tenant improvements. 

    Brokers, investors and developers all say lenders are extremely picky right now when it comes to lending on office properties, given the prominence of remote work and tenants continuing to shrink space. 

    The lenders out there are handing out debt at lower loan-to-value ratios, requiring owners to front more equity. 

    On the Wilshire deal, Wells Fargo disclosed to KBRA that it gave out the loan at a 43 percent loan-to-value ratio. In 2019, the National Association of Realtors reported that about 70 percent of loans had loan-to-value ratios of 75 or 80 percent.

    As of this month, the office building was 63 percent leased, with average rents of about $60 per square foot a year — higher than West L.A.’s average asking rents of about $56 a foot in the third quarter. 

    The property’s largest tenant, Kinetic Content, has a lease expiring in 2026, but has a five-year renewal option. 

    In June, an entity linked to LaSalle Investment Management, which manages the building on behalf of CalSTRS, filed a lawsuit against Braunstein & Braunstein, claiming the law firm owed $920,000 in back rent at the building. 

    Cash flow at the property has risen steadily since 2021, when it took a hit, according to the KBRA report. 

    The building reported net cash flow of $7.9 million from January through October last year, up from $7.7 million for the entire 12 months of 2022. 

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    Isabella Farr

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