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Goldman Sachs, Cruzan Purchase of Prominent Glendale Office Tower Signals Rising Demand North of Los Angeles

Institutional Investors Focus on Home of DreamWorks Animation
September 12, 2018
Goldman Sachs and San Diego developer Cruzan teamed up to buy this 15-story office tower at 505 N. Brand Blvd. in Glendale, California.

A unit of investment bank Goldman Sachs and a San Diego developer bought a prominent office high-rise in downtown Glendale, California, the latest example of rising interest among big institutional investors in northern suburban office markets near Los Angeles.

Following a record year for office sales in Glendale, Goldman Sachs Private Real Estate and prominent San Diego County investment and development firm Cruzan bought the 15-story property, spanning 320,000 square feet at 505 N. Brand Blvd. from Principal Real Estate Investors, CoStar data indicates.

Home of production studio DreamWorks Animation, Glendale sits between the Burbank media hub where Walt Disney Co. has its headquarters and the Pasadena corporate and high-tech concentration where California Institute of Technology is located. Its 12.2 million-square-foot office market has multiple Class A office buildings, with rising rents and relatively higher vacancy than nearby markets, that appeal to investors.

William Boyd, a Glendale-based commercial broker who was not involved in the recent sale, said the city’s downtown office market has seen considerable deal activity over the past three years by competitive big institutional investors looking to take parked money off the sidelines and put it toward well-located real estate.

“What’s pushing this activity is not so much that rents are rising in places like Glendale,” said Boyd, senior managing director with brokerage firm Charles Dunn Co. “It’s about the competition out there among these institutional firms to get that capital placed.”

The price was $93.5 million, or about $292 a square foot, according to CoStar. The average price per square foot of similar buildings sold in the area in the past two years is about $290, according to CoStar.

The Brand sale follows big deals including DivcoWest’s $179 million purchase of the building at 655 N. Central Ave. in March 2017 and Beacon Capital Partners’ $128.3 million purchase of 101 N. Brand Blvd. in September 2016.

Demand for the neighborhood has allowed landlords to push Glendale’s average monthly office rent almost 4 percent to $2.79 a square foot over the past year, according to CoStar.

Glendale, along with Burbank and Pasadena, are known generally to have more affordable rents and property prices than places like downtown Los Angeles and West Los Angeles. While it’s climbed recently, Glendale’s current average monthly office rent rate is still below the Los Angeles market average of $3.23, and its office vacancy rate of 12 percent is above the Los Angeles region’s 10.6 percent.

The competition of the office buildings has potential buyers bidding up prices, Boyd said. Glendale office rents could follow a similar pattern in coming months, as buyers seek to recoup their investment and renovation costs.

Boyd said the Glendale properties are also attractive to buyers for their proximity to local freeways and two of the more popular retail centers in the LA market - popular mall Glendale Galleria and L.A. developer Rick Caruso’s upscale outdoor shopping center Americana at Brand. The property at 505 N. Brand sits practically at the center of Glendale’s downtown offices and those top retail attractions.

In a statement, Goldman officials echoed that sentiment, citing the Glendale property’s location near downtown Los Angeles and its proximity to several nearby apartment and retail complexes as important to attracting office tenants.

Goldman and Cruzan plan to invest in significant upgrades to the lobby, common areas, tenant spaces and exteriors, the companies said in a statement. The buyers have hired JLL to handle leasing.

Officials of Goldman and Cruzan could not be reached for comment.

The latest Glendale deal extends recent moves by Solana Beach-headquartered Cruzan to invest well beyond its longtime base of San Diego County, where its prominent properties include the DiamondView office high-rise in San Diego’s East Village and the Make office complex in Carlsbad.

See CoStar COMP #4255350 and #4397671.

CoStar data shows that Cruzan in April acquired a six-story office building at 9171 Wilshire Blvd. in Beverly Hills for $69.3 million, in a joint venture with Cigna Investments. Then in July, Cruzan purchased a four-story office building at 2151 NW Savier Portland, Oregon, for $34 million, in a venture with Invesco Real Estate.

The buyers said the purchase of the Glendale property was the 26th office investment for the real estate fund operated by Goldman Sachs Asset Management.
For more on this transaction, please see CoStar Comps # 4510100

Story has been updated to reflect the sale price.

Lou Hirsh, San Diego Market Reporter  CoStar Group   
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