Greater-LA Office Building Commands $117M
- Dec 21, 2017
Olive Hill Group LLC has acquired 520 Broadway, a Class A office building encompassing 112,987 square feet in downtown Santa Monica, for $117 million.
Built in 1981, the property underwent $13.2 million in renovations in 2013, and since that time has won many accolades, including being named BOMA of Greater LA’s “Outstanding Building of the Year” in both 2014 and 2017.
“Santa Monica is emerging as a hub for growth in the technology, entertainment, and digital information industries, and is already home to some of the largest tech firms in the country,” Tim Lee, Olive Hill Group’s vice president of corporate development and legal affairs, told Commercial Property Executive. “This active growth, coupled with the lack of available supply in the area made this an obvious choice. Most office buildings of this scale and caliber in Santa Monica are often held by long ownership and rarely trade hands. This acquisition presents a strong opportunity for us to acquire a property in an extremely supply-constrained region of L.A. that will continue to see high demand and rent growth over the next several years.”
At the time of the deal, the building was 82 percent occupied, and three tenant offers have already been made to Olive Hill, prior to the completion of the acquisition.
Amenities in the building include a four-story subterranean parking structure, 24-hour manned security and a newly renovated exterior plaza.
Located at its namesake address, 520 Broadway is situated within walking distance of the Santa Monica Light Rail Station, the Third Street Promenade and Santa Monica Place. It’s also close by approximately 350 new luxury multifamily units.
“A large appeal of the property is the recent opening of Santa Monica’s expo line last year,” Lee said. “The property is located just one block away from the expo line, making it one of the most accessible Class A office buildings in downtown Santa Monica. In addition, one of the building’s tenants, WeWork, went from 15,000 square feet to 60,000 square feet, which guaranteed a long-term anchor tenancy with a strong tenant.”
Short supply drives up rents
The area is home to tech giants such as Google, Facebook, Snapchat, SpaceX, Amazon and Microsoft. According to Cho, the City of Santa Monica imposed stringent development limits in the 1980s, which stifled office development in the market.
“Lack of supply will drive long-term demand for 520 Broadway, which also benefits from the tremendous growth of Silicon Beach, which continues to emerge as a hub for the technology, entertainment, and digital information industries,” he said.
Transwestern’s most recent quarterly report revealed that Santa Monica is a top performing gateway market with average asking rental rates finishing the third quarter of 2017 at $6.04 per square-foot, per month—a peak figure for the area.
Steven Edwards & Grace Winters of Manatt, Phelps & Phillips LLP represented the buyer as legal counsel in this transaction.
A strong track record
Over the last 21 years, the Olive Hill Group and its affiliates have invested more than $2.4 billion in commercial assets encompassing more than 15 million square feet.
Olive Hill Group has been busy in California the past six months. In November, it completed the interior renovation and rebranding of a 106,000-square-foot office building in Los Angeles, now known as The Olive; In July, it began a redevelopment process at its 205,135-square-foot Class A creative office campus in Culver City; and also in July, it obtained $41 million in fixed-rate refinancing for its Courtyard at Culver Pointe, a Class A creative office campus in Silicon Beach.
“We take a long-term hold approach to many of the assets we acquire,” Lee said. “Therefore, we are looking for properties in markets that are positioned for long-term and sustainable growth, as well as feature the latest in high-quality amenities and features. This exceptionally high-quality asset will be a strong addition to our portfolio and continue to deliver strong value and returns over time.”
Image courtesy of Eastdil Secured