Top 5 Commercial Real Estate Deals in LA in 2020 – Commercial Observer
Without the month of November, the list of Los Angeles County’s top commercial property sales would look painfully grim.
It often felt that way this year too – especially in the retail and office markets. Few sales closed, let alone major ones, and reports of increased vacancies and record leasing activity dominated the narrative amid the work-from-home phenomenon.
Fortunately, all was not lost. Due to pent-up demand for content, the Blackstone Group brought back the billion dollar deal in the summer. And the owner of the LA Clippers, billionaire Steve Ballmer, had to end a year-long argument, so this year he struck a $ 400 million forum arena deal to end the argument. Otherwise, the other biggest deal came with a huge COVID-induced discount.
But then, in November, it seemed like commercial properties had their mojo in LA. There was big office space on the west side, as well as further proof that industry is king when Rexford Industrial Realty announced that they had invested nearly $ 300 million in a warehouse business. November also saw a large high-end retail sale for Rodeo Drive and other office businesses that closed just below the deals below.
Studio deals, streaming wars, and content demand sparked some of the few bright spots in Los Angeles real estate this year. And one deal is the obvious favorite that paved the way and gave energy to a near lifeless commercial real estate market in the middle of a summer of COVID energy.
Commercial Observer first broke the news of the deal of the year when Blackstone agreed to acquire a 49 percent stake in Hudson Pacific Properties’ studio and office portfolio in Hollywood. It comprises 35 stages and almost 1 million square meters of office space – almost 75 percent of which is rented to Netflix. The office portfolio includes the ICON, CUE and EPIC buildings as well as the soon-to-be-completed Harlow development, which received its usage certificate in the third quarter.
CBRE reported that after the past three years, increasing demand for soundstages in Hollywood drove rents in Hudson properties to increase by about 20 percent. And Sunset Studios senior vice president Bill Humphrey told CO in September that Hudson had increased rents since the pandemic broke out.
The company is currently advancing plans to add permissions to Sunset Gower Studios. The studio already includes Netflix and ABC as tenants.
Larry Silverstein’s company came from the east coast and agreed to provide $ 430 million to purchase the most iconic building on the Los Angeles skyline. The US Bank Tower is more than 1,000 feet tall and covers an area of approximately 1.4 square feet.
But the deal is not as good as it sounds. According to media reports, the owners first looked for $ 700 million when they launched it in 2019. In Downtown LA, Silverstein achieved the discount of the year, which was probably driven by coronaviruses, with a cut of almost 40 percent.
According to the previous owner, OUE Limited, the price of USD 430 million was reached “taking into account, among other things, the market value of the property and current US real estate market conditions in the relevant sectors amid the COVID-19 pandemic”. The company also said rental income from the property was impacted by the government shutdown, which resulted in tenants reducing or closing operations.
Apollo Global Management supported the acquisition with a loan of USD 275 million.
OUE Limited first acquired the tower in June 2013 for $ 367.5 million.
The $ 400 million sale of the Forum Arena eventually settled the bill between the owner of the NBA’s Los Angeles Clippers and the owner of the New York Knicks – but not over a basketball game. It was the final “godfather” deal made after a game of chicken between two mega-rich billionaires in their battle for the future Clippers arena, which was to rise about half a mile from the forum.
After years of under-the-table allegations of business with local politicians, at least half a dozen lawsuits, and an expensive and controversial mayor’s race in a city of 110,000, the peacemaker’s sale was the one.
Madison Square Garden Company (MSG) and its CEO James Dolan own the New York Knicks and the Forum Arena in Inglewood, California. The company fought the town of Inglewood after its officials gave land – which was originally leased to MSG. to Clippers owner Steve Ballmer for building a $ 1.1 billion complex with a state-of-the-art arena for his basketball team and other entertainment. It did so after MSG spent $ 100 million on redeveloping the forum about half a mile away.
The $ 400 million retail price was probably a bit of an olive branch considering MSG paid $ 23.5 million for the forum in 2012. However, Ballmer, who has an estimated net worth of $ 73 billion, probably considered it to be the cost of avoiding business for months or years of litigation surrounding his plan to have the new Clippers arena for the 2024-2025 NBA season could open up, delay.
Thanks to e-commerce, warehouse properties are the only major asset class that not only remains strong this year but is reportedly expanding rapidly due to the pandemic. With retail stores subject to restrictions and capacity constraints for most of 2020, the demand for online shopping has skyrocketed. That means manufacturing, storage and distribution are king.
Tenants like Amazon are stepping on the accelerator, and owners like Rexford Industrial – one of the leading industrial rental companies in the region – have not let up either. The Real Estate Investment Trust acquired the Gateway Pointe Industrial Campus, a 45 acre complex of four Class A buildings with nearly 1 million square feet of fully rented space. It is home to three tenants, including fashion company Michael Kors and logistics companies DHL and JUSDA.
The deal costs $ 300 per square foot. Rexford funded the acquisition with cash and anticipated previous divestments via 1,031 exchanges. It was owned by Gateway Pointe Investors, which is affiliated with Washington Capital Management and the Unire Real Estate Group.
The deal was announced when the Port of Los Angeles reported its busiest month ever in October, showing the growth and strength of the distribution sector. According to experts, the pandemic accelerated the need and demand for emergency inventory. E-commerce returns this holiday season could run to as high as $ 70.5 billion, a 73 percent increase over the previous five-year average, according to CBRE research.
Despite a global pandemic, West LA-based Rexford closed nearly $ 730 million this year and expects to close another $ 600 million over the next few months.
- $ 166 million: Northwestern Mutual takes over the main office campus in Santa Monica
November could have been the beginning of a major turnaround for the office market. Overall activity is still slower than normal due to another new round of stay-at-home orders and the emergence of coronavirus cases. But significant investments and sales began last month, led by Northwestern Mutual of Santa Monica.
The insurance and investment firm has invested $ 166 million to pick up the city’s main office space called the Colorado Campus, The Real Deal first reported. It is fully leased to the Universal Music Group and the Illumination animation studio. It was owned by Lincoln Property Company and Northwood Investors, who converted the property from industrial real estate several years ago.
Prior to the coronavirus outbreak and subsequent economic stalemate, media companies such as Universal and Illumination pushed office market development and leasing activities, adding or consuming millions of square feet per quarter.
The Colorado campus sale signals an encouraging sign of confidence in Silicon Beach and the Westside office market after months of unprecedented uncertainty and widespread hesitation.
- $ 162 million: Apple acquires five properties in Culver City
Another notable office deal landed on the Westside of LA County in November when Apple acquired five properties over 4.5 hectares in Culver City.
In addition to an already-rented office building, the tech giant acquired a block of offices and warehouses for $ 162 million owned by Venice Pacific Investments. according to CoStar. The properties currently include a flexible office property, a traditional office property as well as a warehouse and warehouse and two other properties. Apple could renovate the real estate and combine it into an office or studio campus.
The site is adjacent to an office building owned by Clarion Partners and Lincoln Property Company, which spans 128,000 square feet and is leased to Apple.
Tech companies, as well as streaming companies and production companies like Netflix, Amazon Studios, and Apple TV + are a growing segment of office space in LA. Companies like Google and Facebook are expanding their work-from-home strategies as stay-at-home. When orders return, the importance of a big company like Apple continuing to invest in new real estate at a tech hub like Culver City cannot be overstated will.
- $ 122 million: Coveted Rodeo Drive Space Trades in Beverly Hills
Retail is without a doubt the sector hardest hit by the ropes. Old, defunct malls were the stage for a wave of conversions even before the pandemic, and online shopping continues to grow.
But traditional high-end retail, where the experience of luxury means as much as the products, can hopefully lead the way for retail survival and success.
In November, Crown Equity and Ascendent Capital Partners sold the 11,600-square-foot property at 457-459 North Rodeo Drive in Beverly Hills for $ 122 million. This deal costs about $ 10,500 per foot, 20 percent more than what they paid for it in September 2018.
It is currently leased to Alexander McQueen and Brioni, who are due to be vacated soon, according to media reports.