Fierce Competition for 1.2 Million-SF Site Lead to City’s Highest Ever Sale Price, Showing Strength of Westside Workplace Submarket
In what could be among the biggest workplace sales ever in Los Angeles County, Boston Characteristic has agreed to pay Blackstone Group $616 million for its 1.2-million-square-foot Santa Monica Service Park.
The pending acquisition represents a major expansion into the Los Angeles market for Boston Properties, the most recent of its five core markets. For Blackstone, the sale brings a high cost for among the last pieces of its 2007 acquisition of Equity Office Characteristic Trust, and stands as a testimony to the ongoing strength of the Westside office market.
The openly traded Boston-based workplace company, one of the biggest real estate investment trusts in the nation, divulged the hit deal in its very first quarter revenues report today.
The $616 million purchase, expected to close later on this quarter, includes the entire 21-building workplace park, which is 94 percent occupied. Significant renters include disappearing messaging app Snapchat’s moms and dad business, which inhabits 300,000 square feet in the office park with a choice to broaden by an extra 100,000 square feet in the future. Other significant renters consist of Pandora Media Inc. and Activision Blizzard.
Most of the 47-acre website at Ocean Park Boulevard and 28th Street in Santa Monica stays on a ground lease held by Transpacific Advancement Co., which constructed the workplace park in the 1980s. That lease, which holds an approximated worth of about $250 million, has 80 years staying on its term, but Boston Characteristic deserves to purchase it out starting in 2028.
When completed, the deal is expected to end up being the highest-priced office sale in the city of Santa Monica, and the highest overall rate paid for a workplace property in Los Angeles County considering that downtown’s City National Plaza sold for $858 million in 2013, inning accordance with CoStar records.
Boston Properties dealt with intense competitors from a handful of institutional and high net-worth financiers for the right to buy the desirable office home.
Other bidders included Douglas Emmett Inc., Worthe Property Group, Alexandria Realty Equities and Hudson Pacific Residence, according to brokers involved with a few of those companies’ bids but not authorized to speak on the record.
Rumors that either Snap or SOHO China, a Beijing-based developer, had actually both made last minute quotes on the property spread out through the Los Angeles brokerage neighborhood over the weekend.
Final blind bids for the property were due last Friday and Boston Properties’ deal was selected Monday night, inning accordance with a source associated with the deal.
The record-setting transaction shines a spotlight on the ongoing strength of the Santa Monica market, which is among the stars of LA’s Westside. The city is the home of a variety of start-ups and successful tech and media companies, ranging from Hulu to Riot Games that have helped make the area the moniker “Silicon Beach.” The area’s workplace market has actually been amongst the greatest in the nation this cycle with both sale and lease costs at historic levels.
Steve Basham, senior market expert at CoStar Group, publisher of CoStar News, stated that, while office rent development in the city has actually slowed given that skyrocketing earlier in the cycle, the Santa Monica Organisation Park offer reflects bullish long-lasting investor views on the city, which is almost totally built-out and development-adverse.
“The location is insulated from downturns,” Basham said. “It’s a varied location with high-credit occupants. This is an unique property since nobody is can be found in to Santa Monica to build another 1.2 -million square foot workplace complex.”
For Boston Properties, which owns about 50.3 million square feet across the country made up of offices, residences, retail residential or commercial properties and a hotel, the Santa Monica Organisation Park will be an essential expansion of its existence in the Los Angeles market.
Business officials has been eyeing a growth in Los Angeles as its 5th core market given that 2016 when it obtained its first foothold in L.A. after getting a 50 percent stake in an existing joint endeavor with Teachers Insurance and Annuity Association at Santa Monica’s 1.1 million-square-foot workplace complex Colorado Center for about $500 million.
Boston Residence’ portfolio includes the 1.2 million-square-foot Times Square Tower office complex in New York, the 3.3 million-square-foot mixed-use Embarcadero Center in San Francisco and the 3.6 million-square-foot mixed-use Prudential Center in Boston.
The agreement list price of $616 million total up to about $513 a square foot. In total value, this is the greatest priced office sale in the city of Santa Monica given that Worthe Realty Group’s sale of 2600-2800 Colorado Ave., a 315,000-square-foot office task, to Oracle Corp. for $368 million, or about $1,166 per square foot, in 2016, according to CoStar records.
In the county of Los Angeles, it will be the most costly deal because CommonWealth Partners Management Solutions LP purchased the 3 million-square-foot City National Plaza complex at 515 S. Flower St. in downtown L.A. from CalSTRS in 2013 for $858 million, or $284 a square foot.
The seller is an unit of private equity giant Blackstone Group, which obtained the workplace residential or commercial property at 2850-3420 Ocean Park Blvd., beside the Santa Monica Airport as part of its $39 billion buyout of Chicago’s Equity Office Residence Trust in 2007.
Blackstone has been shopping the 47-acre home with Eastdil Protected since in 2015 as part of a push to sell the three significant properties obtained through that buyout. The others are a 32-story workplace tower at 100 Summertime St. in downtown Boston and the rights to a ground lease under San Francisco’s Ferryboat Structure.
Boston Properties is anticipated to close on the acquisition throughout the 2nd quarter.