CRE Owner and Developer Becomes The Latest Far East Investor to Buy U.S. Trophy Properties
An affiliate of Overseas Union Enterprise Ltd. (OUE) has agreed to acquire the 72-floor U.S. Bank Tower and adjoining parking garage in downtown Los Angeles from MPG Office Trust, Inc. (NYSE: MPG
) for $367.5 million.
The 1,018-foot structure in Bunker Hill has been the tallest building west of the Mississippi River since it was built in 1989, but the office tower has struggled in recent years, with 56.6% occupancy as of Dec. 31, 2012, according to an MPG regulatory filing last week.
The building has been a topic of interest since last December when MPG stated that it did not expect to be able to pay off the $250 million A-note loan on the asset securitized in three CMBS deals due to mature in July 2013, which sent the loan back to special servicer LNR.
MPG announced the sale, which includes Maguire Gardens and the adjoining six-level Westlawn Garage underground garage, is scheduled to close on June 28 following the expiration of a tax indemnification agreement. OUE made a non-refundable $7.5 million deposit.
The Los Angeles-based office REIT has sold numerous properties in recent years to pay off deep debt incurred during the weak office market since the recession. After payment on the property's debt, MPG will apply the $103 million in net proceeds toward the potential refinancing of its upcoming 2013 debt maturities, which include 777 Tower and KPMG Tower.
While occupancy on those properties is significantly higher than occupancy at U.S. Bank Tower, they also face increased debt pressure as tenants downsize and negotiate lower rents, according to a research note from Nomura Securities.
OUE is a diversified real estate owner, developer and operator with a large portfolio in Singapore, and hotels in Malaysia and the People’s Republic of China. The company is acquiring the properties from Library Square Associates, LLC, a subsidiary of MPG, through its wholly-owned U.S. subsidiary Beringia Central LLC.
"After a successful 2012, OUE is seeking new avenues for growth where value can be identified and realized," said OUE Executive Chairman Stephen Riady. "We intend to bring our knowledge and network to bear in pursuing new opportunities to generate value for shareholders. U.S. Bank Tower is a well-positioned building that we expect to appeal to a broad base of both local and international office tenants operating in California."
OUE intends to leverage on its strengths in leasing and asset repositioning to increase occupancy and net operating income on the asset, adding that the company "has developed expertise from its active lease management of office and retail properties in Singapore."