A Sunset Strip office tower that was formerly the headquarters of Playboy Enterprises Inc., along with an adjoining shopping center, have been acquired by a Palo Alto investment firm for $100 million, a sign that local commercial property values are still rising.
Broadreach Capital Partners, which bought the Sunset Millennium complex in West Hollywood from Apollo Real Estate Advisors, intends to make the retail center more upscale, Broadreach Managing Director David Simon said Monday.
Los Angeles County office and retail real estate prices have climbed rapidly in recent years as investors scrambled to take advantage of the region's improving economy and rising rents. Prices have particularly soared in neighborhoods that cater to the entertainment industry.
Last month two Sunset Strip office towers were sold for a near-record price per square foot for the county. This year Broadreach bought the 14-story CNN building in Hollywood for $50 million. The firm is investing at least $5 million in improvements in the hope of luring tenants who can pay higher rents.
Apollo renovated the 43-year-old former Playboy building at 8560 W. Sunset Blvd. in 2001 and built the shopping center next door in 2002 as part of its Sunset Millennium project on the Strip. Only those properties have been completed.
Neighbors have sued to stop further Apollo development to the west that would include two hotels, a condominium complex, stores and restaurants. A Los Angeles Superior Court judge ruled in favor of the project this year, but opponents have appealed the decision and continue to contest Apollo's statements about the potential effects of the project on traffic, air quality and other issues.
If Apollo completes its proposed hotels and condos, "our pieces will be that much more attractive," Broadreach's Simon said.
In the meantime, Broadreach plans to spend as much as $5 million on cosmetic improvements, including outdoor seating, in an effort to make the shopping center's plaza more pedestrian friendly.
Ketchup, a restaurant owned by the celebrity-backed firm Dolce Group, is scheduled to open in the shopping center next month. Simon also expects to replace defunct eatery Norman's with a high-end restaurant. Other new tenants will include an H&M; fashion store.
Some of the second-floor space in the shopping center will be converted to offices for rent, Simon said. The 10-story former Playboy tower is completely leased, mostly to entertainment industry businesses.
"Quality office space in this submarket is extremely tight and we see rents continuing to improve for some time," Simon said.
Apollo representatives did not respond to requests for comment about the sale. The New York-based real estate fund manager has been working on Sunset Millennium since the late 1990s.
The city of West Hollywood approved the development but some neighbors and nearby hoteliers have battled to keep it from getting underway.
"The impacts to this area are going to be devastating," said opponent G.G. Verone, who owns a home overlooking the Strip. "You can't just keep building."