Privately held Douglas Emmett Realty Advisors has acquired the 10-story Imperial Bank Tower in Beverly Hills' so-called Golden Triangle as the Brentwood-based firm continues its buying spree while real estate investment trusts take a breather.
That transaction and other pending Douglas Emmett acquisitions suggest that the publicity-shy firm, which buys and operates commercial real estate on behalf of various institutional investors, will continue to jump on local commercial real estate investment opportunities as other investors--REITs in particular--back off.
Douglas Emmett is also expected to acquire the big Westside Towers complex on Olympic Boulevard, the smaller Coral Plaza building on San Vicente Boulevard and the Glendale Federal Plaza building across Sepulveda Boulevard from the Sherman Oaks Galleria, which Douglas Emmett acquired last summer.
Market observer Kevin Dretzka, a managing director with real estate investment banking firm Eastdil Realty in Century City, said Douglas Emmett is prudently taking advantage of both the expected rental hikes in second-tier Westside buildings and sub-markets, and a window in the capital markets as once-frantic investment activity by publicly traded REITs tapers off.
Most of the premier buildings in the most sought-after Westside locations are close to fully leased today and have seen rents rise sharply, Dretzka said. Hence, the second-tier buildings in the top-tier locations, as well as the better buildings in the next-best locations, are poised for better rents and occupancies as well.
No purchase price was disclosed for the Imperial Bank building, but Westside real estate sources estimated that the 129,000-square-foot tower at 9777 Wilshire Blvd., where Wilshire and Santa Monica boulevards intersect, probably fetched more than $200 per square foot--which adds up to around $26 million. The building sits on land leased from a separate landowner.
The Imperial Bank building, originally completed in 1965 and renovated six years ago, is a second-tier building in a top Beverly Hills location. And Westside Towers is a top property along the Olympic Corridor in West L.A., which saw the last big development wave in the 1980s after buildings in the most desirable Westside sub-markets filled to capacity, Dretzka noted. Westside real estate sources estimated that the 404,500-square-foot Westside Towers could fetch as much as $220 per square foot--a total of nearly $90 million.
As usual, officials at the Douglas Emmett group declined to comment on the Imperial Bank acquisition or other purchases in the works. Headed by low-key real estate investor and avid outdoorsman Dan Emmett, Douglas Emmett earns fees from its investor clients for acquiring, managing and leasing the properties in its considerable portfolio. The firm frequently buys with investor cash and follows up months later by placing conservative mortgages on the properties, freeing up capital for additional acquisitions.
Douglas Emmett was among the few active contrarian investors that bought up large office buildings on the cheap when the local commercial real estate market was bottoming out earlier this decade.
Among its earliest major acquisitions: the high-end Studio Plaza multi-tenant office building in the heart of the Burbank Media District for $83 million and the Nestle USA headquarters building in nearby downtown Glendale for a reported $115 million. Douglas Emmett has since focused extensively on high-quality Westside office buildings--nearly cornering the market around its headquarters in high-demand Brentwood and likewise becoming a leading landlord within Beverly Hills and the Olympic Corridor.
Given the prices investors have paid as the Westside and the Burbank/Glendale vicinity have rebounded sharply over the last couple of years, those properties are believed to be worth tens of millions more today than when Douglas Emmett acquired them. But there has been no indication that Douglas Emmett is interested in selling.