Warner Center Towers Deal Struck
Douglas Emmett Realty Advisors has agreed to buy the Warner Center commercial district’s signature glass-skinned office towers from their institutional owners for nearly $340 million, real estate sources said, making the Santa Monica-based investment manager the largest owner of premium office space in the San Fernando Valley.
The five-tower complex along Oxnard Street in Woodland Hills was developed between the mid-1970s and early 1990s by Warner Center pioneer Robert Voit and his partners. Warner Center is the western San Fernando Valley’s primary commercial hub and might be the financial heart of the nation’s sixth-largest city if the Valley secedes from Los Angeles.
Alaska Permanent Fund Corp. and Harvard University’s endowment fund have owned the high-rises as well as the adjacent Warner Center Business Park “low-rise” complex since the mid-1990s. Agents are said to be negotiating a separate transaction for the business park with another Southern California-based buyer.
Douglas Emmett assembled a portfolio of office buildings on the Westside starting in the early 1990s, then targeted prime buildings along the Valley’s Ventura Boulevard corridor in recent years. The firm also has quietly accumulated a substantial portfolio of high-rent apartment towers in and around Brentwood and in Santa Monica.
Early this year, Douglas Emmett completed its transformation of the iconic Sherman Oaks Galleria from a prototypical indoor mall into a combination shopping, entertainment and office complex.
The price Douglas Emmett is expected to pay for the Warner Center high-rises, which include nearly 1.9 million square feet of offices, factors to about $180 a square foot, which is less than it would cost to duplicate the development today, real estate observers said.
The high-rises have been more than 20% vacant since the departure of HealthNet Inc., said Bill Inglis, the office portfolio’s director of leasing. However, AIG Sun- America just agreed to expand its offices in the 25-story Warner Center Plaza III tower from 96,000 square feet to about 156,000 square feet through a $50-million lease renewal and expansion.
Douglas Emmett declined to comment on the pending transaction. A representative of Boston-based AEW Capital Management, which oversees the Warner Center portfolio for the sellers, said the firm would not discuss the deal until it closes. That’s likely to happen in August, according to sources familiar with the sale’s terms.
The pending transaction represents “the continued affirmation that institutional capital flocks to quality real estate in key sub-markets,” said Jeremy Fletcher, regional chief executive of Beacon Capital Partners, which recently bought the nearby Trillium office complex for $134 million.
The West Valley’s overall vacancy rate, including space available for sublease, was just under 15%, according to real estate brokerage Colliers Seeley. As is the case elsewhere in the region, office rents in the West Valley have fallen back from the peaks reached a year or two ago. Rental rates are unlikely to rebound until an improved economy boosts tenant demand, Colliers Seeley said.
