Metropolitan Life Buys El Segundo Office Plaza
Metropolitan Life Insurance Co. has purchased the 2-year-old Continental Grand Plaza II office building in El Segundo for $67.2 million, a move that suggests some institutional investors remain bullish about Southern California despite the recent decline in tenant demand.
At more than $280 a square foot, the price is one of the highest paid for an El Segundo office property. The New York-based insurance giant bought the six-story, 240,000-square-foot building at 400 Continental Ave. from a joint venture of El Segundo-based Summit Commercial Properties Inc. and Cranford, N.J.-based Mack-Cali Realty Corp. Summit is a division of real estate investment company Highridge Partners Co., also of El Segundo.
The project, completed in 1999, rented space briskly when technology companies and other office tenants were flocking to the El Segundo area.
With the signing of BroadVision Inc. to a 7-year, $5-million lease for 22,500 square feet last November, Continental Grand II was 100% leased. Monthly rents approached $2.75 a square foot as BroadVision and the building’s other new tenants negotiated terms.
Publicly traded real estate investment trust Mack-Cali and privately held Summit Commercial teamed up in the late 1990s to develop Continental Grand Plaza II, as well as three research-and-development buildings in northern San Diego’s Sorrento Mesa district.
The developments were expected to cost a total of $56.4 million--with Mack-Cali retaining an option to purchase the properties after they filled with tenants.
However, the REIT’s chief executive, Mitchell Hersh, said Southern California is no longer one of Mack-Cali’s “core” markets, and sale proceeds will be reinvested in the Northeast and Mid-Atlantic regions.
Secured Capital Corp. brokered the transaction on the sellers’ behalf.
Santa Monica investment broker Bob Safai of Madison Partners said MetLife’s willingness to pay “a Westside price” for an El Segundo building indicates that institutions still want to buy superior Southern California properties.
Although the city’s office vacancy rate has risen somewhat as the economy slows, brokerage services company CB Richard Ellis reports that El Segundo landlords are asking substantially more for vacant office space today than they were a year ago.
The average asking rent today is $2.53 a square foot, compared with $2.23 a year ago. The vacancy rate is 8.3%, up from 5.7% at mid-year 2000. Vacancies may rise further as developments under construction are completed.
