Affiliates of privately held Northern California real estate firm Krausz Cos. have quietly purchased two El Segundo office buildings--each fully leased to prominent technology companies--for an estimated $65 million to $70 million.
The deals are the latest indication that commercial real estate investors remain attracted to well-leased commercial buildings in El Segundo despite two trends potentially reducing office demand: the general technology downturn on Wall Street and a rash of new construction in and around the pro-business city.
Utilizing mortgage financing from KeyBank, Krausz is estimated to have paid a combined price of about $255 per square foot for the buildings at 2300 E. Imperial Highway and 2101 E. El Segundo Blvd., which total about 270,000 square feet of rentable offices. They are leased entirely to affiliates of Hughes Space & Communications and Raytheon.
The price is a bit less than the $281-per-foot insurance giant MetLife recently paid for one of El Segundo's newest buildings, the fully leased 240,000-square-foot multi-tenant building known as Continental Grand Plaza II at 400 Continental Ave. That was one of the highest prices ever paid for an El Segundo office property.
The Krausz deals also apparently highlight the successes of an opportunistic local real estate investment group that risked considerable equity capital buying the then-unleased properties as the El Segundo market heated up over the last few years.
Affiliates of Brentwood-based Proficiency Capital bought the 1963-vintage 2300 Imperial building in 1999 for about $9 million from a family trust.
The seven-story, 157,000-square-foot facility had been vacant for nearly a decade after being occupied for much of its life by North American Rockwell.
Just after completing a $10-million renovation last year, Proficiency was able to sign Hughes Space & Communications (now Boeing Satellite Systems) and Hughes' DirecTV satellite-television unit to leases worth about $35 million in rental revenue.
Also last year, Proficiency bought the five-story, 113,000-square-foot 2101 El Segundo Blvd. building that struggling tech-equipment distributor Merisel was vacating. Raytheon expanded its local operations by taking over the entire property for a seven-year lease term.
Citing a confidentiality agreement with the buyer, Proficiency declined to discuss the sales. Krausz principal F. Ron Krausz is out of the country and also unavailable for comment.
Thomas Bohlinger, John Ayoob and Grafton Tanquary of CB Richard Ellis brokered Proficiency's sales to Krausz. The company also declined to discuss the transactions.