Warner Center Business Park to Be Sold

Kearney Real Estate Co. and financial partner Morgan Stanley will buy Warner Center Business Park in Woodland Hills for about $55 million, according to real estate investment professionals tracking the transaction.

Executives at Century City-based Kearny acknowledged that they have signed an agreement to acquire about 15 low-rise office buildings in the heart of the Warner Center commercial district.

Meanwhile, the institutional owners that are selling the complex to Kearny are scheduled to close escrow in September on the sale of the adjacent Warner Center Plaza high-rise office complex.

An institutional fund managed by Santa Monica’s Douglas Emmett Realty Advisors is buying five glass towers on Oxnard Street for an estimated price of nearly $340 million.

Kearny Real Estate usually invests in partnership with Morgan Stanley Real Estate Funds, which holds a 50% interest in the company. Senior executives such as Jeff Dritley, Kearny’s managing partner, own the other half.

Dritley confirmed that Kearny has agreed to buy Warner Center Business Park, with the transaction scheduled to close this year. He wouldn’t disclose the price his firm is paying or its plans for the complex.

Representatives of the sellers, the Alaska Permanent Fund Corp. and Harvard University’s endowment fund, declined to discuss either sale.

Their partnership, known as AH Warner Center, has owned the Warner Center Properties portfolio since the mid-1990s.

AH Warner hired Los Angeles real estate investment banking firm Secured Capital Corp. last year to find one or more buyers for the 2.3-million-square-foot portfolio of commercial buildings at the core of the western San Fernando Valley’s commercial hub.

Early this year, Douglas Emmett executives began negotiating exclusively for the high-rises with executives of Secured Capital and AEW Capital Management, AH Warner Center’s asset manager for the portfolio.

The $55-million price reported by market observers for the low-rise buildings was less than previous estimates of the properties’ worth. That cost appears to reflect continued economic uncertainty as well as the complex’s vacancy rate, which recently surpassed 25%, according to Warner Center Properties’ Web site.

Although asking rents for West Valley office space have remained stable over the last year, overall vacancies, including space for sublease, have topped 15%, from 11.3% a year ago, according to brokerage Colliers Seeley.

Office buildings under construction probably will lead to slightly higher vacancies in the months ahead, putting pressure on rents at least until next year, the firm said.

The Kearny group, whose origins stem from Morgan Stanley’s big real estate funds formed in the early and mid-1990s, has been an active player in Southland commercial real estate for many years.

The firm has improved the performance of other West Valley commercial properties, including Warnerview Corporate Center and Calabasas Courtyard.