Tishman Speyer buys former Hilton Hotels headquarters in Beverly Hills
The vacant former headquarters of Hilton Hotels Corp. in Beverly Hills has been purchased by a New York landlord, underscoring the growing strength of the commercial real estate market as investors swoop in on upscale properties.
On Tuesday, Tishman Speyer bought the two adjoining office buildings on Civic Center Drive from Hilton. The hotelier was acquired by corporate buyout giant Blackstone Group in 2007 and moved from Beverly Hills to McLean, Va., in 2009 to be closer to Blackstone’s New York headquarters.
The new owners will spend $23 million to modernize the buildings completed in 1985 to make them attractive to tenants, said John Miller, a managing director at Tishman Speyer.
Terms of the sale weren’t disclosed, but real estate experts familiar with the transaction said Tishman paid more than $55 million; the property was last assessed by Los Angeles County at $88 million. The price reflects the drop in value that hit commercial properties during the recession.
Miller called the acquisition “an attractive value,” based on comparable prices of other properties in the area.
Tishman’s purchase of the granite-clad Hilton buildings with their 18 balconies and underground parking is emblematic of investors’ demand for upscale properties as the commercial markets heat up.
The two property categories trading most are “trophies and trash,” analyst Peter Slatin of Real Capital Analytics said. Buyers want either the security of a well-located building that is easy to lease or a deep discount on a distressed property.
“Prices are continuing to firm up,” Slatin said, and total nationwide commercial property sales in 2010 were more than double what they were in 2009.
The Los Angeles investment market began to thaw in 2010 after hitting a 10-year low in 2009, according to a report by real estate brokerage Grubb & Ellis. Banks are beginning to offer loans for buyers again, but with tighter underwriting standards than in the past.
Among the key office sales last year was the $208-million purchase of Union Bank Plaza in downtown Los Angeles by a real estate investment trust, Grubb & Ellis said.
At Hilton’s old digs, few signs of the hotel operator’s long presence remain, apart from a lobby rug emblazoned with the company’s logo and an electronic world map in the spacious former boardroom that shows what part of the globe is in daylight.
The 1980s corporate-style finishes such as marble floors and mahogany wainscoting aren’t likely to appeal to creative industry tenants, though, and will be removed, Miller said.
“We’re going to blow out all the tenant work so you can see lots of light,” he said. The company also will update the buildings’ mechanical systems such as elevators and will re-landscape the outdoors.
Entertainment businesses are the most likely candidates to rent the space, Miller said. Concert promoter Live Nation Entertainment Inc. occupies a building next door, and several industry tenants such as Castle Rock Entertainment, Starz and Netflix are in buildings that Tishman Speyer owns nearby on Maple Drive.
The acquisition represents a comeback of sorts in the region for Tishman Speyer, which is among the country’s largest commercial developers and landlords. The company and its financial partner, Walton Street Capital, in 2009 defaulted on a $155-million loan on property they owned in Playa Vista. That year Tishman also sold an Orange County office building for less than half the price it had paid.
Tishman reacquired 19 acres of commercially zoned land at Playa Vista last summer, but this is the company’s first new acquisition in Southern California since the recession.
“We’re back playing offense again,” Miller said.
