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Douglas Emmett Builds Presence in the Valley

Owner of the Sherman Oaks Galleria is buying key buildings in Warner Center in Woodland Hills.

June 25, 2002|JESUS SANCHEZ | TIMES STAFF WRITER

After amassing a huge collection of office buildings on the Westside of Los Angeles, Douglas Emmett Realty Advisors is rapidly emerging as possibly the biggest player in the San Fernando Valley office market.

The Santa Monica-based real estate investment and management firm already owns a string of office buildings along Ventura Boulevard in the Sherman Oaks-Encino business corridor, along with what may be the Valley's most well-known property, the newly renovated Sherman Oaks Galleria office and retail complex.

Further west in Woodland Hills, Douglas Emmett has agreed to pay about $340 million for a cluster of high-rises that account for about one-third of the office space in Warner Center, which many consider the Valley's most prestigious corporate address. By the time Douglas Emmett completes its Warner Center acquisition, it will own or manage about 4.5 million square feet in the area.

In creating strongholds in the Valley's two most prominent business districts, Douglas Emmett has duplicated a strategy it has followed on the other side of the Santa Monica Mountains, where its clusters of properties in such markets as Brentwood and downtown Santa Monica have limited competition and have given it greater clout with tenants and brokers.

"They are in key locations with limited opportunities for new development," said longtime developer Gerald Katell, whose office is in one of the nine Douglas Emmett office buildings along San Vicente Boulevard in Brentwood.

Founded more than 30 years ago, Douglas Emmett took advantage of the real estate bust of the early 1990s by teaming up with institutional investors to scoop up scores of office properties across the Los Angeles region. The firm, headed by Dan Emmett, has continued to add to its portfolio and now controls more than 10 million square feet of commercial space.

Though known primarily for its Westside holdings, Douglas Emmett has built a considerable presence in Sherman Oaks and Encino, where the company controls about a dozen office buildings on Ventura Boulevard totaling about 2.5 million square feet of space, according to real estate data provider CoStar Group. The hub of these holdings is the busy intersection of Ventura and Sepulveda boulevards, where Douglas Emmett owns properties on three corners, including the site of the Sherman Oaks Galleria.

Quick access to the 405 and 101 freeways as well as the stores and restaurants along Ventura Boulevard has made the Sherman Oaks-Encino area popular with small and mid-size professional firms, brokers say.

"Douglas Emmett has done a good job in cornering that market," said broker Nico Vilgiate at Insigna/ESG. "It will allow them more leverage at the negotiating table with tenants and ... brokers alike."

In the case of the Sherman Oaks Galleria, Douglas Emmett practically gutted the former mall of "Valley Girl" fame and transformed it into an open-air center with three office buildings towering over a bustling shopping and entertainment complex. Plans for palm trees and other street improvements at the intersection are part of an effort to create a more cohesive and visually attractive hub.

"It's a true gateway project," said Douglas Emmett President Kenneth Panzer. "That's what makes it unique, and that's why a lot of companies relocate to the Galleria."

Only a few miles west in Woodland Hills, the five-building complex Douglas Emmett is buying along Oxnard Street form the high-rise nucleus of Warner Center. Unlike the smaller professional and service firms that gravitate to Sherman Oaks and Encino, larger, corporate tenants prefer the bigger buildings of Warner Center, brokers say.

"They will be controlling quite a bit of product in two strategic locations," Cresa Partners broker Carlo Brignardello said of Douglas Emmett.

But Douglas Emmett faces tough competition for tenants in Warner Center, where it will have to fill nearly 300,000 square feet left vacant when health maintenance organization HealthNet Inc. moved into a new building at nearby LNR Warner Center. John Sabourin, a Colliers-Seeley broker who represents LNR Warner Center, said he expects to square off against Douglas Emmett when a 179,000-square-foot building opens next year at his project.

"They will have to be pretty price-competitive," he said.

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