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Monday, May 23, 2022

Harman in High Fidelity

A manufacturing complex in Northridge is undergoing a makeover for new tenants – including one of the biggest names on the internet. The previous headquarters of electronics manufacturer Harman International Industrial Inc., now owned by Samsung Electronics Co. Ltd., will emerge from adaptive construction as a traditional business park with new, modern and diversified occupants. According to multiple anonymous sources, one will be social network giant Facebook Inc. Newport Beach developers Shubin Nadal Realty Investors and financial partner DRA Advisors of New York are revamping the 44-acre complex on Balboa Boulevard. They bought it in 2014 because they saw a healthy tenant mix, including Harman’s professional audio speaker operation; a prime location near major freeways and the Van Nuys Airport; and a dense surrounding population. But more important to the developers – who specialize in fixing up properties with vacancies and outdated elements to increase occupancy and raise rents – was the empty and underutilized industrial space ripe for redevelopment into creative offices, outdoor work areas, retail businesses and restaurants – popular elements in contemporary office parks. “When we bought the property, it had one big vacancy and a big space with a short-term lease on it that was always going to be a short-term lease,” said Bill Shubin of Shubin Nadal. “The goal in acquiring the property was to convert those spaces that were desirable and marketable in today’s marketplace.” Industrial to creative Sidney Harman, who passed in 2011, co-founded Harman/Kardan in 1953, and the company grew with audio equipment brands such as AKG, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson and Revel. Harman’s 400,000-plus-square-foot main speaker manufacturing plant was the company’s world headquarters. In 2008, however, the company consolidated and moved its headquarters to Stamford, Conn. Last March, Harman sold to Samsung for $8 billion. The site includes two large traditional office buildings opposite Harman’s current building, fully leased to companies involved in health care – Pharmavite, a vitamin and herbal supplements maker owned by Japanese health care company Otsuka Pharmaceutical Co. Ltd.; and Regal Medical Group Inc., an affiliate of Heritage Provider Network, among other tenants. Shubin Nadal and DRA Advisors saw opportunity in industrial space Harman once occupied in its massive main building, where a movie production studio had been taking space on a short-term lease. There was also a smaller industrial building that hadn’t attracted a tenant for several years. Together, the two spaces totaled about 330,000 square feet, Shubin said. “The two industrial spaces really weren’t in leasable condition for long-term occupancies,” Shubin said. “They both had been on the market for about five years and never got any traction.” Those spaces helped the project fit with DRA Advisors’ opportunistic business model that seeks out projects where it can add value, said Daniel Goldman, managing director of acquisitions. Plus, it gave the firm a chance to expand its presence in California’s highly competitive industrial market, where value-add opportunities are decreasing, he added. “When we closed (on the purchase of the property), we didn’t the know the final plan, but we believed in the intrinsic value, and location, and demographics, and we looked at the density of rooftops – how many live and work at close range,” Goldman said. “When you look at the huge density in Northridge and East San Fernando Valley, we felt here there was something to capitalize on.” The pair’s vision was to subdivide the underutilized half of Harman’s plant into mostly creative office suites to attract tenants that would lease the spaces for the long-term. The developers kept about 65,000 square feet industrial, but broke up the remaining 142,000 square feet into five separate suites. Down the middle of the renovated portion runs a 20,000-square-foot common corridor which provides access to each of the suites. Inside the building, the industrial origins are clear in its cavernous feel and ultra-high ceilings. Shubin and partner Lonnie Nadal added large skylights and windows to bathe the interior with natural light. They covered the floor with a mix of carpet and polished concrete. The tall corridor-facing doors and walls of the creative office suites are glass. “This is classic adaptive reuse,” said Martin Coyne, also with DRA. “It’s kind of having the old and the new blended together.” Creative office elements continue in the corridor with small sitting booths equipped with outlets and WiFi along the wall intended for individual or small groups; cozy huddle rooms, groupings of casual furniture to facilitate socializing and colorful wall-sized murals done by art students at California State University – Northridge. “It (creative office) is more than just open ceilings, and brick-and-timber kind of look,” Shubin said. “It’s also an environment where outdoor areas are part of the service that buildings are offering. So, landscape and seating, outdoor areas, and visuals and graphics are an important part of that.” Outside, the developers sliced off part of the building to build an outdoor patio and eating area under a pergola, broke up the brick exterior around the entrance and patio with metal-like accent panels for a more modern look and surrounded the building with new landscaping. The team also set aside an eating area and place for food trucks and installed a bocce ball court in the back. Finally, they installed walking paths so employees can move freely between the offices and the restaurants on the park’s southwest corner. Shubin, Goldman and Coyne point to new tenants for the creative office suites – about 56 percent of the renovated space – as testament of a successful adaptation. About 90,000 square feet is still available. New tenants include HemaCare Corp., a biotech company in Van Nuys, which has leased about 40,000 square feet and plans to relocate its headquarters there next summer. A second tenant has been identified as Facebook in Menlo Park by sources close to the project, but not by Shubin, DRA or their brokers due to nondisclosure agreements. According to one source, the social media giant is taking about 70,000 square feet. The space is currently undergoing tenant improvements. “People seem to like the product,” Shubin said. “I think the big spaces are an attraction. Users like having everybody on one floor under one roof.” Adapting to creative office makes economic sense for property owners because they can get higher rent than from conventional office space or industrial. Shubin said that was true for their property as well, and that they have not had to make any concessions so far, while achieving the rents they planned on. “Tenants that want that space are willing to pay for it – maybe 10 to 15 percent (more),” Shubin said. “It does cost more – the tenant improvements are more, and the conversion costs are more, but the economics work.” The project has had its fair share of challenges. Plans for the older buildings have been hard to find or not accurate, while the North Central Valley location of the complex has discouraged some media and entertainment companies that prefer to be close to Burbank and Hollywood, Shubin said. “That’s been somewhat frustrating because I think we have a really good environment for those kinds of uses,” he said. Industrial to retail The Harman complex will be re-branded as The Mix at Harman Campus, a term reflective of the diversity of industrial, manufacturing, traditional office, creative office and new service retail and restaurants. With the long-vacant 115,000-square-foot industrial building now demolished, a 37,000-square-foot LA Fitness facility is currently under construction in the southwest corner of the complex. Next to it are two buildings that will hold seven or eight quick-serve eateries, including a Chipotle Mexican Grill Inc., WaBa Grill Franchise Corp. and a Shipoki Bowl. With the fitness facility, the retail portion is about 89 percent leased, Shubin said. “Fast-casual is the most sought after in the retail segment,” Coyne said. “All the 17,000-square-feet of retail is going to be in that segment.” The fitness facility and the restaurants make up the walkable amenities in the business park that landlords and developers find to be critical to attract tenants. The developers turned to retail brokers at Jones Lang LaSalle Inc. of Chicago for feedback on whether replacing the industrial with retail would keep existing tenants of the park and deliver new ones, Shubin explained. “They researched, and came back and said, ‘Yes, it should work,’” he explained. “That was really important to what we felt was the overall success of the project.” In the middle of the retail and restaurants will be an outdoor eating area with patio tables and umbrellas – about 30,000 square feet – and Shubin and Nadal are conjuring up ways to remember Sidney Harman in this space.

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