Library Tower Deal Disclosed
Developer MaguirePartners said Friday that it bought out its partner in the tallest building on the West Coast, the 73-story Library Tower in Los Angeles, in what industry observers say is one of the largest recent transactions involving a downtown skyscraper.
The Los Angeles real estate company did not disclose the value of the deal for the building, which stands 1,017 feet tall. But people familiar with the negotiations said the transaction, which involves the assumption of debt and new equity investment, values the 1.3-million square-foot building at about $360million.
MaguirePartners, which teamed with a private equity fund managed by Credit Suisse First Boston Equity to complete the purchase, did not identify the seller, but real estate brokers said it is the insurance company Dai-Ichi Life of Japan.
The Library Tower transaction was complicated by the high cost and scarcity of terrorism insurance that came about after the Sept. 11 attacks on the World Trade Center in New York.
In addition, the fate of one of the building’s largest tenants, Andersen, came into question during negotiations as the accounting firm’s role in the Enron Corp. scandal unfolded.
“Trying to put this deal together ... was a bear,” said Robert F. Maguire III, managing partner of MaguirePartners, which built the 12-year-old skyscraper.
After meeting with insurers around the globe, MaguirePartners eventually acquired terrorism coverage as part of an insurance policy for its entire portfolio of nearly 13million square feet of commercial space, spreading the cost over multiple buildings. The firm did not disclose the identity of the insurance firm.
“This is a high-profile building,” said MaguirePartners advisor and attorney Paul S. Rutter. “It was extremely important to everybody in the transaction that the terrorism risk be covered.”
The fate of Andersen, an original tenant that occupies about 10% of the building, remains up in the air. The firm is preparing for widespread layoffs and faces a potential breakup as it battles lawsuits and a charge of obstruction of justice filed by federal officials.
Maguire, whose company uses Andersen as its chief accountant, said that if the firm remains intact it probably would stay in the building because its rents--signed under long-term leases--are far below current market prices.
If Andersen were to vacate its space, which totals about 160,000 square feet, Maguire said, he was confident that he would find tenants willing to pay higher rents. The building is 95% occupied, the company said.
For Maguire, the completion of the Library Tower purchase is part of a remarkable comeback from the mid-1990s when his firm was in deep financial trouble and he lost control of the giant Playa Vista development near Marina del Rey. Taking advantage of the rebound in Southern California real estate values in recent years, Maguire has been able to sell properties at top dollar and refinance buildings under favorable terms. His firm is currently building the first office building complex at Playa Vista and a smaller commercial project in Santa Monica.
About a year ago, Maguire’s company bought out Dai-Ichi’s interest in another downtown skyscraper, Gas Company Tower, which the two partners had owned for many years.
The cylindrical Library Tower, on 5th Street near Flower Street, and nearby Gas Company Tower were among a handful of downtown skyscrapers that Maguire’s firm built during the 1980s and early 1990s.
MaguirePartners has benefited from a turnaround in downtown real estate values and a growing list of attractions, including sports venues, restaurants and new housing. Office occupancy and leasing rates have held up relatively well even as conditions deteriorated dramatically for landlords on the Westside and in other major office markets.
“This [Library Tower] acquisition is important for our firm given our long-standing commitment to downtown Los Angeles and our desire to increase market share downtown,” Maguire said.
Maguire and Dai-Ichi were represented by Secured Capital and Jones Lang La Salle, respectively.
The transaction values Library Tower at about $275 a square foot, according to people familiar with the deal. Although high by downtown standards, the value pales in comparison to prices paid for some Westside properties during the real estate run-up that began in the late 1990s.
In 2000, for example, Orange County real estate mogul Donald Bren paid well in excess of $400 a square foot for the 34-story Fox Plaza in Century City.
