One of Burbank's signature high-rises, the 32-story Tower, has been purchased for $115 million by real estate giant Tishman Speyer as the city's Media District continues to attract entertainment industry tenants and wealthy real estate investors.
Tishman Speyer bought the 494,000-square-foot complex alongside the Ventura Freeway from a real estate investment fund managed by Boston-based Beacon Capital Partners. Tishman Speyer's other properties include Rockefeller Center and Chrysler Center in its home city of New York and Colorado Center in Santa Monica.
A subsidiary of Japanese real estate and construction company Kumagai Gumi developed the building -- on Alameda Avenue south of the freeway -- in 1989 in a venture overseen by local real estate entrepreneurs Stephen Geiger and Dee Christiansen. Saudi arms dealer Adnan Khashoggi was the key financial partner in the $85-million development before the Japanese firm took over.
Beacon bought the Tower last year from Kumagai Gumi affiliate Tochikogyo USA Inc. for almost $100 million. The building is 97% occupied, with Walt Disney Co. filling the vast majority of it. Other tenants include Morgan Stanley and retail outlets for brokerage Charles Schwab Corp. and Union Bank.
The presence of Disney and many other entertainment industry tenants makes the Burbank office zone highly desirable to landlords, said John Miller, senior managing director of the West Coast for Tishman Speyer. His company and Atlanta-based investment partner Lend Lease Value Enhancement Fund out-bid several other large investors for the high-rise.
"The Media District is going to continue to be one of the best submarkets in all of Southern California," said Miller, citing the "huge investments" in nearby studios made by Disney, Warner Bros., NBC and others.
Office vacancy in the Media District is hovering in the single digits, said real estate broker Carl Muhlstein of Cushman & Wakefield, and no buildings will be built in the near future.
He represents owners of the Pinnacle, a 400,000-square-foot building that opened last year on West Olive Avenue, across from the Tower on the other side of the Ventura Freeway, and was 90% leased within 12 months. Bravo Channel recently agreed to move there from Santa Monica and will take 19,000 square feet in an 11-year, $8-million lease agreement.
The Media District benefits from "its confluence of film, television and radio," Muhlstein said. "It's a strong interaction that is hard to beat."
The $115 million paid by Tishman Speyer breaks down to about $233 a square foot, a bit less than the $245 a square foot Beacon and CarrAmerica Realty Corp. paid in June for 10 Universal City Plaza in Universal City. When Beacon bought the Tower last year, Jeremy Fletcher, chief executive of the Western region, estimated that it would cost $275 to $300 a square foot to replicate the building at current construction costs.
Tishman Speyer has developed or acquired a portfolio of more than 40 million square feet valued at more than $15 billion, which includes high-rise office buildings, retail spaces, residential properties and entertainment centers.