Warner Center Office Buildings Are Hot Properties Real Estate by Shelly Garcia Rents may be falling, vacancies may be rising and real estate may be in the doldrums, but none of that, it seems, is dissuading buyers from Warner Center office properties. As Douglas, Emmett & Co. and Kearny Realty Group continue to negotiate for the 2.3-million-square-foot Warner Center Properties complex of buildings, two more office properties in the business hub have sold. American Realty Advisors acquired an 89,393-square-foot office building at 21900 Burbank Blvd. for $14.5 million, or $162 a square foot. The building is the headquarters of Unova Corp., which will continue to lease the property. It is currently about 94-percent leased. An Arden Realty Inc. property at 6800 Owensmouth Ave. was acquired by Westlake Village investors for $8.4 million. The 80,000-square-foot building is about 85-percent leased by tenants that include Hughes Credit Union and Kinney Shoes. Several things seem to be driving the demand for Warner Center properties. One is the scant supply of Class A office buildings in the L.A. area in general. Another relates to the specifics of the Warner Center sub-market. With the exception of additional square footage under construction at LNR Warner Center (a drop in the bucket), the area is built out, limiting supply well into the future. And most of the tenants currently in the area are blue chip names in for the long haul. In other words, it will take an act of God to put a serious dent in occupancy rates. Indeed, there were 25 offers on the Burbank property, according to Mark Perry, first vice president at CB Richard Ellis, who represented both buyer and seller in the deal along with Bonnie McRae, Bill Inglis and Bob Shafer. As Stanley Iezman, president and CEO of American Realty, which acquired the Burbank property for a pension fund client, said, “We are pleased to be part of the supply-constrained Warner Center office community where our research confirms the sub-market’s long-term growth potential.” But if the healthy long-term prospects for Warner Center are spurring demand, so too is the short-term weakness. Ask a broker and he or she will tell you the properties commanded a “fair” price, but the fact is these buildings sold for a darn good one. Despite the long-term outlook, financing available for these sales is based on current rental trends, and with vacancies up and rental rates down, capital markets are limiting the amount of money they are willing to shell out to finance these acquisitions. That is putting a cap on purchase prices. Then why sell now? Brokers say there’s no real consistent trend indicating why these buildings have all gone on the block in so short a time frame. Many, like the Owensmouth property just sold by Arden, are institutionally owned, and institutions have distinct time frames for holding onto properties. Unova, which has owned the building for just a few years, has been laboring under significant earnings losses, but it’s believed that the reason for the sale has less to do with its financial situation than it does with its own internal administrative issues. Owning real estate just isn’t in its business plan. Last year’s deals, including the Trillium towers, the 21st Century Plaza and Warner Center Corporate Center, also seemed to have been influenced by separate and disparate factors, everything from exit strategies implemented by the developer of the building to portfolio sales by real estate companies. Oddly enough, perhaps the only lesson to take away is that real estate is decidedly a cyclical business, not only for the highs and lows of the market but also for the spurts of selling activity. And with the largest of these deals, Warner Center Properties, still to close, along with a few other buildings expected to change hands sooner rather than later, this cycle isn’t over yet. AvalonBay Digs into Glendale AvalonBay Communities Inc. has broken ground on a $50 million apartment complex at 11347 N. Central Ave. in Glendale. The development, the first since Alexandria, Va.-based AvalonBay opened a regional office in Southern California in 1997, will include 223 one-, two- and three-bedroom units. Components of the luxury development will be connected through paseos and will include a community center, pool and fitness center, among other amenities. Rents will range from $1,700 to $2,900 per month. Since it opened in Southern California, AvalonBay has purchased and renovated 18 apartment communities in San Diego, Orange and Los Angeles counties. The company’s plan is to develop 700 to 1,000 apartments in Southern California annually. Encino Sale First Financial Plaza, a 217,491-square-foot office building at 16830 Ventura Blvd. in Encino, was acquired by Glenborough Realty Trust for $47.3 million, or $217 per square foot. Tom Bollinger, Sean Sullivan, Mark Perry and Madeline Schwartz, brokers with CB Richard Ellis, represented the buyer and seller, Cornerstone Suburban Office LP in the deal. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at email@example.com.