Santa Monica’s status as the destination of choice for technology and entertainment businesses got another boost with the $90-million sale to a Houston real estate investment firm of five “creative” office buildings — those highly designed, edgy alternatives to typical corporate environs.
Lionstone Group, one of the largest owners of creative offices on the Westside, bought the buildings from a limited partnership made up of investors who are in the entertainment industry, brokers said. The deal comes at a time when well-located buildings are selling at a premium but others are languishing.
Technology- and entertainment-industry businesses, which increasingly work together in such enterprises as video games and animated movies, have gravitated to the seaside in the last two decades. Workers in both sectors have shown a desire to avoid the kind of boxy glass and granite office towers favored by most of corporate America.
Instead, owners of such companies frequently set up shop in smaller buildings that once had industrial uses. Although unglamorous on the outside, the buildings tend to have renovated interiors rich in design, often with such features as walnut stairs and European-style kitchens.
One of the properties acquired by Lionstone is at 2415 Michigan Ave. in Bergamot Station, a former railroad yard and manufacturing center. Tenants there include game maker Hooky Interactive Inc. and entertainment support firm Pier 59 Studios West, real estate data provider CoStar Group said.
Other properties acquired by Lionstone are in downtown Santa Monica at 631 Wilshire Blvd., 625 Arizona Ave. and 401 Santa Monica Blvd. Those buildings and the Bergamot Station property were built before the 1950s and have been fully renovated, according to real estate brokerage Industry Partners, which represented the sellers.
The fifth building sold, at 1351 4th St., was built in 1995. Tenants there include radiology provider Image Advantage and farming company Bolthouse Farms.
“Everybody wants to be in Santa Monica,” said commercial property broker Vince Muselli of Muselli Commercial Realtors, who was not involved in the transaction. Its restaurants, shops and ocean breezes are attractive to businesses, he said. “It’s a great place to schmooze and make deals and just feel good about the world.”
Although the coast appeals to many kinds of businesses, tech companies have made such a beeline to the area that Santa Monica and Venice have earned the nickname “Silicon Beach.” Start-ups such as TrueCar Inc. and Riot Games are growing there alongside Internet stalwarts Yahoo Inc. and Google Inc.
“The demand for creative office space from tech, new media and postproduction companies is driving leasing activity on the Westside,” making it one of the tightest office markets in the region, said broker Scott Rigsby of Industry Partners.
Rents in some buildings surpass $5.50 a square foot per month, twice the cost of space in a prominent downtown Los Angeles high-rise.
“Investors will pay a premium for property in Santa Monica and make less of a return on their investment because the foundation of this area is so good that there is a small likelihood investment will head south instead of north for the long term,” broker Muselli said.
The five buildings purchased by Lionstone have a combined total of 165,000 square feet and are about 90% leased.
Other properties owned by Lionstone include Lantana Entertainment Media Campus and Penn Station Studios in Santa Monica and Alameda Media Center in Burbank.
By Roger Vincent, Los Angeles Times
December 13, 2011
Five Santa Monica office buildings sell for $90 million