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Divco West Purchases Manhattan Towers

Commercial Real Estate

Real estate: The fully leased South Bay office complex is bought for about $55 million.

November 14, 2000|BRAD BERTON | SPECIAL TO THE TIMES

One of the Bay Area's most active real estate investment and development companies has purchased the twin Manhattan Towers office complex along the South Bay's popular Rosecrans Corridor for about $55 million.

As the lively bidding for the fully leased property suggests, many commercial real estate companies are bullish on prospects for raising rents and values in the increasingly technology-oriented area of El Segundo and Manhattan Beach.

San Jose-based Divco West Properties, which entered the Southland marketplace last year with the acquisition of a pair of Century City high-rises, now owns the twin six-story, 150,000-square-foot buildings at 1230-1240 Rosecrans Ave. in Manhattan Beach.

Divco West's investment partner in the acquisition is Harvard University's endowment fund, which is advised by Charlesbank Capital Partners of Cambridge, Mass.

Divco West plans to upgrade the Rosecrans buildings through various improvements--a strategy that has helped the company fill up the Century City buildings.

TRW occupies about three-fourths of the office space in Manhattan Towers at a rental rate considered well below what it would have to pay to remain once its lease expires in 2002. Divco West's regional Vice President John Moe said TRW hasn't determined whether it will stay.

Real estate services company CB Richard Ellis reports that the El Segundo area's office vacancy rate has fallen to barely 4%. Annual rents average $28.80 per square foot--about twice what they were in the early 1990s.

As the area has transformed from an aerospace and defense industry hub into something of a "new-economy" center in recent years, rents and values have climbed steadily. Several developers now have large projects underway or in planning.

El Segundo's newest large office building, the 240,000-square-foot Continental Grand Plaza II, just leased the last of its vacant space, about 22,500 square feet, to e-commerce software specialist BroadVision Inc.

Jack Mahoney, president of El Segundo's Summit Commercial Properties, which developed the Continental tower in partnership with Mack-Cali Realty, said top El Segundo office buildings can now fetch rents in the $35-per-square-foot vicinity.

Divco West competed with a dozen or more prospective buyers in its bid to purchase Manhattan Towers from American Industrial Properties of Irving, Texas. Investment specialists Jay Borzi and Steve Silk of Secured Capital Corp. brokered the sale.

Moe said Divco is looking for more suburban office and research-and-development properties in Southern California to buy.

Divco West is headed by co-founders Stuart Shiff and David Taran, who along with their colleagues have purchased more than 9 million square feet of commercial space and 700 acres since launching the company in 1993.

The bulk of Divco West's holdings are in the Bay Area, particularly the Silicon Valley vicinity. Divco West's strategy typically entails purchasing and fixing up properties where rents are expected to rise--especially in areas where new-economy tenants are growing.

Divco West recently sold a San Jose office complex for nearly four times what it paid three years earlier. The company and partner Westbrook Partners also recently sold a high-rise in San Francisco, where rents and values skyrocketed over the last year or two.

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