CalSTRS Purchases Four Buildings in Valencia

The California State Teachers’ Retirement System has purchased nearly 400,000 square feet of office properties along Town Center Drive in Valencia for $72.3 million in cash.

CalSTRS, through an investment program managed by Los Angeles-based Thomas Properties Group, purchased four buildings, including Princess Cruises’ headquarters, from Newhall Land & Farming Co., the Santa Clarita Valley’s biggest land developer.

Newhall Land reported that the sale price is $7.8 million beyond what it cost the company to develop the buildings, which are adjacent to the Valencia Town Center regional mall. Newhall Land will use most of the sale proceeds to pay down outstanding debt.

The four buildings are well over 90% leased despite generally high office vacancies in the Valencia vicinity. According to property services company CB Richard Ellis, Valencia’s office vacancy rate was nearly 40% at the end of the third quarter--the highest rate in the greater Los Angeles region.

Office rents in Valencia average a little more than $22 per square foot annually, compared with nearly $25 for L.A. County overall, according to another services firm, Trammell Crow Co.

Cushman Realty Corp.’s investment services group brokered the sale on Newhall Land’s behalf.

Newhall Land also closed its $12.9-million sale of 19 acres in the Town Center area to Ron Rasak and his RJR Development of Sherman Oaks, which plans to develop a 184,000-square-foot upscale shopping center. The transaction will contribute $6.6 million toward Newhall Land’s fourth-quarter income.

Newhall Land had conducted extensive negotiations to sell the entire 790,000-square-foot Valencia Town Center mall. But the prospective buyer, reportedly an institutional client of Chicago’s RREEF Funds, backed away after Edwards Theaters Circuit, which operates cinemas in the mall and in Newhall Land’s nearby Valencia Entertainment Center, sought Chapter 11 bankruptcy protection.

A Newhall Land spokeswoman said the company continues to work with other prospective mall buyers, but a deal is unlikely until the Edwards situation is resolved. Newhall Land units fell 2 cents to $21.58 Monday on the New York Stock Exchange.