M. David Paul & Associates has put its portfolio of Burbank properties up for sale, a transaction that could fetch upwards of $800 million, sources said. The Santa Monica-based developer is selling about 1.6 million square feet of office property, including the second phase of The Pinnacle, one of the most prestigious buildings in the city and arguably in Los Angeles. The move comes as prices for office properties have skyrocketed, persuading a number of owners, including Arden Realty and Maguire Properties to divest their holdings. “I think it’s fair to say it’s really good timing,” said Paul Stockwell, managing director of Studley, who is not involved in the sale. “Everyone knows office buildings are selling for lots of money. They’ve had a great run and I’m sure they’ll take their profits and deploy them to other projects.” Officials at M. David Paul did not return phone calls seeking comment. But brokers and others in the real estate community have been told that the Pinnacle, with about 235,000 square feet of space; Media Studios North, a 1.2 million-square-foot campus with about five buildings, and Central Park, with about 250,000 square feet of office space, are being marketed for sale. The portfolio does not include a parcel of land remaining to be developed at the Media Studios North site or a 9-acre property that M. David Paul recently acquired from NBC’s parent General Electric Co. Sources said that M. David Paul plans to retain and develop those properties. Several brokers estimated that the portfolio is likely to be valued at about $500 a square foot, a record price for office properties. But brokers said the building tenants, an escalating demand and limited supply of office space and a hunger for properties, particularly by institutional investors, would justify the pricing. “There’s a lot of institutional capital in the market and L.A., and especially Burbank, are some of the best performing office markets in the U.S.,” a broker said. Among the tenants occupying the properties in the portfolio are Warner Bros., Yahoo and WMC, a mortgage banking division of G.E. “When you are selling a property that has long term leases with Warner, Yahoo and WMC, the good news is you have tenants locked in,” said Stockwell. “The bad news is there isn’t a lot of upside.” Some investors acquire properties that have vacancies and some marginal tenants with the intention of renovating the buildings, bringing in a better class of tenants and raising the rents. The M. David Paul properties already are considered top of the line with corresponding tenants, a profile that is sought after by institutional buyers, who tend to buy and hold properties for long periods of time. Several years ago, M. David Paul sold off the first phase of The Pinnacle to RREEF, an institutional investor. While prices for institutional quality office buildings have been skyrocketing, they have yet to break the $400-per-square-foot mark, even in Burbank which attracts many entertainment industry tenants. At the same time, rental rates, which are already inching up to more than $3 a square foot in Burbank, are rising even more dramatically in other parts of Los Angeles that also attract the same kinds of media tenants. Recently, a portion of the Arden Realty portfolio sold to Trizec Properties for $1.6 billion. Earlier, another Los Angeles based real estate investment trust, Maguire Properties Inc., sold a controlling interest in its $1.2 billion, 4-million square-foot portfolio of office buildings to an Australian-based real estate investment trust.
