UPDATED: Office Transaction, One of the Largest L.A.Portfolio Trades Since the Great Recession, Was Revealed Last Month After Weeks of Market Speculation
A joint venture of Douglas Emmett (NYSE: DEI
) and Qatar Investment Authority (QIA) on Tuesday closed the purchase of a four-tower, 1.72 million-square-foot office portfolio in the Westwood district of Los Angeles for about $1.34 billion, or $777 per square foot.
CoStar information shows the previous owner of the four buildings at 10960, 10940 and 10880 Wilshire Boulevard and 1100 Glendon Ave. as Blackstone Group LP, which acquired the buildings as part of its 2007 takeover of Equity Office Properties Trust.
DEI will manage the insitutional joint venture, which has obtained a non-recourse $580 million interest-only loan with a seven-year term to fund 43% of the transaction, which closes several weeks earlier than the March 31 date projected by the Santa Monica, CA-based office and apartment REIT. The portfolio was 89% leased, according to a DEI document filed last month with the SEC.
The transaction is one of the largest office acquisitions in Los Angeles in recent years and gives DEI a 74% market share in L.A.'s high-profile Wilshire Westwood Corridor. With the transaction, Emmett's total commercial portfolio now consists of 66 office properties totaling about 17.2 million rentable square feet. DEI also owns 10 apartment communities in Los Angeles and Honolulu with a total of 3,336 units.
The venture also represents another step in QIA's plan to significantly expand its U.S. investment portfolio. In 2015, QIA announced plans to invest $35 billion in North America over five years.
Fundamentals in DEI's core Los Angeles office submarkets, consisting of Westside and Sherman
Oaks/Encino, show that rents continue to rise by an average of more than 10% per year. Starting cash rents in office leases signed during the fourth quarter by DEI were 12.8% higher than the expiring rent from the prior leases covering the same space, while straight line rents were up 28.6%.
The company leased 634,096 square feet during the fourth quarter and increased the leased rate for its total office portfolio to 92.9%, with an occupancy rate of 91.2%, according to SEC documents.