$134-Million Purchase Closes on 2 Towers in Warner Center

Despite an uncertain economic outlook and last week’s attack on the nation’s most visible commercial property, an institutional investment fund assembled by Boston’s Beacon Capital Partners closed escrow Monday on its $134-million purchase of the Trillium towers in Woodland Hills.

The Trillium property includes twin 15-story office buildings at 6300 and 6320 Canoga Ave., along with a Cheesecake Factory restaurant, retail stores, athletic club and extensive parking above and below ground. The property also includes the land under the adjacent 318-room Hilton Woodland Hills & Towers.

The Trillium buildings hold about 600,000 square feet of offices that are almost entirely leased, said Jeremy Fletcher, chief executive of Beacon Capital’s Western region. Some of the larger tenants pay rents well below current market rates.

The seller, institutional giant California Public Employees’ Retirement System, expected to get a higher price when it put the property up for sale through Los Angeles real estate investment banker Secured Capital Corp. six months ago. Although the Warner Center district remains a relatively strong office submarket, the slowing economy has reduced real estate investment return expectations.

Investment in Warner Center commercial property has been particularly active lately, with affiliates of the British real estate company Grosvenor and Century City-based Bentley Forbes Group acquiring Warner Corporate Center and 21st Century Plaza, respectively.

Owners of the district’s biggest and most visible group of office towers--the Warner Center Plaza along Oxnard Street--actively are marketing the property for sale, also through Secured Capital. The portfolio is expected to fetch more than $400 million, as institutional investors in particular have continued buying well-leased trophy-type office properties.

Beacon Capital and mortgage lender MetLife went forward with the Trillium closing even as Beacon’s staff grieved the death of an employee who had been working on the transaction. Analyst Heather Smith was on one of the hijacked flights that crashed into New York’s World Trade Center.

“We are not wavering from our core market strategy despite the horrific tragedies of a week ago,” Fletcher said.

Trillium’s purchase price comes to about $195 a square foot of rentable space--about halfway between the $230 paid for the fully occupied 21st Century complex and the approximately $165 paid for the 75% leased Warner Corporate Center.

Among the Trillium’s larger tenants are Blue Shield of California, Ryland Mortgage Co., Infosys Inc. and Dassault Systems of America. The property’s leasing agents are asking about $30 a square foot annually for available space. Investment Development Services will assume property management and assist Grubb & Ellis with leasing.

As was the case with the 12-story Warner Corporate Center building just north of the Trillium complex, the Trillium sold for substantially less than it did near the peak of the 1980s economic cycle. CalPERS reportedly paid more than $200 million for the property. A development team headed by Norm Kravetz and Carl Terheggen completed the Trillium towers in the 1980s.

Beacon Capital Partners is headed by longtime Boston real estate figure Alan Leventhal. He and his senior colleagues had grown Beacon Properties Corp. into a major publicly traded real estate investment trust before merging the company in late-1997 into the biggest office REIT, Equity Office Properties.

Leventhal subsequently launched Beacon Capital Partners, which is headed by much of the Beacon Properties senior management team. The firm and its investor clients have purchased more than $600 million worth of commercial real estate and launched developments costing nearly $350 million.

The company’s latest investment fund, Beacon Capital Strategic Partners I, has been actively pursuing properties in San Francisco, Seattle, Denver, Washington and Boston.

Rents in the greater San Fernando Valley continued to climb moderately through mid-year but may tail off in the months ahead as the economy continues to slow and new developments open, brokerage Colliers International reports. The relative absence of dot-com failures in and around the Valley should prevent significant rental-rate erosion, the brokerage projects.

Asking rents in the 16 million-square-foot western Valley submarket including Warner Center average about $27 annually, up about $2 from the beginning of the year.

The vacancy rate including sublease space is about 10.5% according to CoStar Group Inc.