Ohio Pension Fund Buys in Glendale
The pension fund that invests on behalf of Ohio’s public school teachers has formally acquired the 18-story Glendale City Center I office tower and the adjacent site of a planned high-rise for $95.8 million.
The price paid by the Ohio State Teachers Retirement System is equal to an aggressive $231 per square foot for the nearly full existing tower and another $7 million for the site of City Center II, which has approvals for up to 380,000 square feet of rentable office and retail space.
OhioSTRS declined to comment in its development plans, but sources familiar with the fund’s strategies said it intends to start construction of the second tower shortly. The Glendale market is a busy one, with a 24-story under construction and several other office developments planned.
The square-footage rate OhioSTRS paid for City Center I is close to what institutional investors paid for the nearby Nestle USA Inc. headquarters building three years ago--and probably the most paid for a Glendale high-rise since Japanese giant Shuwa Investments Corp. paid almost $250 per square foot for the 505 N. Brand Boulevard tower in 1988, when demand for Southern California real estate was at an all-time high.
Veteran commercial broker Bill Boyd said he finds it “particularly interesting” that a pension fund would make the best offer for the Glendale properties, given the aggressive investing by Wall Street-backed real estate investment trusts in recent years--including Menlo Park, Calif.-based Spieker Properties’ purchases of three large office buildings last year in Pasadena.
Glendale City Center’s sellers are other pension funds advised by downtown L.A.-based Westmark Realty Advisors, a unit of publicly traded commercial-property-services giant CB Richard Ellis. The Westmark and CB executives involved in the sale had expected the 385,000-square-foot City Center I would fetch more than $200 per square foot, given the aggressive commercial realty capital environment and strong tenant demand in downtown Glendale.
Despite recent indications that tenant demand may be softening somewhat, Glendale has been one of Southern California’s tightest office markets in the last couple of years, benefiting from “spillover” demand from entertainment tenants unable to find space in nearby Burbank. Traditionally, Glendale’s tenant base has largely been made up of finance and insurance companies.
However, the market has experienced a bit of a hiccup recently as some of the biggest entertainment firms in downtown Glendale--Walt Disney and Warner Bros.--tried to sublease some of their offices while locally based PacTen Partners is erecting a 24-story high-rise in partnership with the Morgan Stanley Real Estate Fund.
One apparent result is that the PacTen-Morgan team hasn’t announced any tenant commitments at its high-rise--although industry observers say entertainment tenants tend to make last-second occupancy decisions rather than lease space long before a building is completed.
