Developer Has Major Hit on Its Hands in Santa Monica Project

With last week’s signing of leases with two more prestige tenants--the J. Paul Getty Trust and Microsoft Corp.--landlord M. David Paul Development has filled an entire 306,000-square-foot Santa Monica office property it bought empty some 30 months ago.

Reflecting the Paul group’s first and biggest tenant, the two-wing, five-story complex on Colorado Avenue that was once home to a health-care giant is now known informally as “the MTV building”--hinting at the kinds of tenants that it has attracted.

While the MTV building’s just-signed residents are a tech giant and a $5-billion institution, the flourishing media-entertainment industry has led the charge as once-teetering local landlords have seen tenants fill much previously vacant space, especially in Burbank and Santa Monica. The names Sony Music and MGM adorn high-profile buildings near the MTV complex at 2600-2700 Colorado Ave.

The Santa Monica-based Paul group’s namesake founder and his partner Jeff Worthe “took a cold institutional office building and created one of the most sought-after entertainment addresses on the Westside,” said Brad Feld, the veteran Cushman & Wakefield broker who handles leasing at the Colorado property and other M. David Paul projects.

The developer specifically targeted the entertainment community by pursuing a “creative feel” through the renovation--and communicating its intentions to prospective tenants, Feld said.

Along with extensive landscaping and a remodeled lobby, Feld said, the Paul team added several amenities aimed directly at the creative community: a “studio-type” commissary, screening room, full-service gym and professionally run day-care center.

The strategy worked. Other tenants include EMI Music, Artisan Entertainment (formerly Live Entertainment), Pearson Television and architectural firm Perkins & Will.

The Paul group bought the Colorado Avenue property from Tenet Healthcare for a reported $37 million in mid-1996, when Tenant relocated its headquarters to Santa Barbara. The developer had already arranged a deal bringing the bulk of Viacom’s local MTV Networks operation from Universal City to Santa Monica--where it now occupies about 106,000 square feet.

At the time, entertainment tenants were already flocking to the Westside, particularly to the eastern Santa Monica commercial district around the intersection of Colorado and 26th Street.

M. David Paul bought the Tenant property before Westside rents had risen to levels justifying the cost of new office developments. Hence, the firm has for the most part avoided competition with the three projects now under construction in the neighborhood--none of which has yet announced any tenant commitments.

“Their timing was impeccable,” said Michael Preiss, a broker with Klabin Co. who represented an entertainment company leasing offices at the Colorado property.

Considering that choice properties in the neighborhood command annual rents of $35 or more a square foot, the Paul group could probably sell the Colorado property for somewhere between $285 and $325 per square foot--the upper figure factoring out to nearly $100 million--estimated both Preiss and Michael Burlant, a vice president with Cushman Realty Corp.’s Westside office.

“They were prepared to step up and take a calculated risk when others weren’t--and now they’re prospering from that wise decision,” Burlant said of the Paul team.

Jeff Cowan, managing director with brokerage Julien J. Studley Inc. who represented architectural firm Perkins & Will as it sought a Westside office last summer, noted that few Westside buildings attractive to the creative community have much space available for near-term occupancy.

Cowan also said the MTV building offers several key features particularly attractive to creative types. Among them is its “low-rise” configuration with its large, wide-open floor plan, rather than a more corporate high-rise structure that would typically have more compact floors.

As a design specialist, Perkins & Will was particularly drawn to the Colorado complex’s “edgy” feel that “matched their personality,” Cowan added. And in addition to special features such as the commissary and day-care center, he said, the building also has “all the amenities of a first-class office building.”

M. David Paul has also scored with its creative renovation and expansion of a former corporate building in Burbank. The firm signed Walt Disney to the entire 200,000-square-foot former Lockheed “Skunk Works” building before launching a new 215,000-square-foot second phase of the Ontario Street project called Media Studios North. That just-completed phase is already 50% leased, and a second-quarter 1999 groundbreaking is scheduled for the next phase.

M. David Paul has also set its sights on the reviving Hollywood district. As vacancies have dwindled and rents jumped on the Westside and in Burbank, the entertainment industry is returning to Tinseltown. The Paul group has responded by acquiring the so-called Tribune Co. property near the Hollywood Freeway and Sunset Boulevard. It plans to further develop the site.