This Week's LA Deal Sheet

By now you've heard about Brookfield's big lease renewal with Capital Group, one of the world's largest investment firms—323k SF at Bank of America Plaza in DTLA. But what you may not know is the positive message this sends about a key Downtown industry and neighborhood.

This morning we chatted with Brookfield SVP John Barganski (snapped at Bisnow's State of the Market this year). The long-term renewal follows Oaktree's 182k SF lease extension and expansion across the street in Wells Fargo Center. John tells us that Brookfield has renewed and expanded over 500k SF of financial services firm leases on Bunker Hill in the past 90 days. And they're not done yet. Brookfield is just weeks away from announcing a third deal that will bring the total to nearly 600k SF. The leasing activity makes a big statement for an industry group that, while prosperous, hasn't been overly active Downtown in making this scale of space commitments. The deals also solidify Bunker Hill, the master-planned collection of premier office properties (where Brookfield owns three prominent assets) as the center for the financial services industry in LA, he says.

Capital Group is one of the original tenants in Bank of America Plaza (333 S Hope St), having occupied space in the building for close to 40 years. John says the firm was sensitive to securing expansion rights, an indication it intends to grow over time. The firm will be investing a significant amount of capital to refresh its space, and its plans suggest it'll be able to accommodate additional professionals as the firm implements a new workplace strategy. Capital Group was represented by JLL's John McRoskey, Frank Scott and Tony Morales. Brookfield was repped by its in-house leasing team, which besides John includes James Malone, Rachael Zanetos and Marin Turney.

SALES

A JV formed by Hines and funds managed by Oaktree Capital Management purchased Tri-City Corporate Centre, a 17-building mixed-use office complex containing more than 1M SF in San Bernardino. CBRE’s Kevin Shannon, Brad Burton, Ken White, Michael Kendall, Michael Longo and Phil Woodford brokered the sale on behalf of Rancon Realty Fund IV and Rancon Realty Fund V. Rancon built the master-planned business park from 1986 through 2008. The buildings range from mid- and low-rise to flex, including eight Class-A office towers. The project is 61% leased; tenants include Northrop Grumman, Art Institute of California, CalPERS, Health Net and Parsons Brinckerhoff. In addition, the campus is entitled for more than 300k SF on four parcels of land. According to CBRE, this was the Inland Empire's largest office sale ever in terms of square footage. Kevin notes the business park's size allows the buyer to control a significant piece of the rebounding IE office submarket, which has posted more than 1.3M SF of net absorption since 2010.

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CBRE Group entered into a definitive agreement to acquire Johnson Controls' Global WorkPlace Solutions business, which provides integrated facilities management for major commercial real estate occupiers around the world, for nearly $1.5B. GWS will operate as part of CBRE’s Global Corporate Services business. Together, CBRE and GWS will manage nearly 5B SF of real estate and corporate facilities globally, including 2.3B SF in the Americas, 1.2B SF in Europe, the Middle East and Africa, and 1.4B SF in Asia Pacific. The deal's expected to close in late Q3 or early Q4, pending the usual regulatory approvals.

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Emare LLC acquired an 86k SF industrial building on four acres in Chino (4850 Eucalyptus Ave) for just under $9.8M in an off-market transaction. Lee & Associates repped both sides: Henry Hong for the seller and Stephen Shatafian for the buyer, which distributes cellphone cases and accessories. According to Henry, the Chino market's seeing high demand for industrial real estate. Last year, he and Michael Lee repped a large dumpling company in the purchase of 11 acres to build corporate offices and a food manufacturing facility.

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Harridge Capital Group bought a 3.3-acre development site in Northridge (8350–8454 Reseda Blvd) from Lehr Properties for just over $6.1M or $43/SF. The site boasts 511 feet of frontage along Reseda Boulevard and is well-positioned for a mixed-use development, according to Madison Partners' Lynwood Fields, who repped the buyer. NAI Capital's David Young and Chad Gahr repped the seller. The property is the former home of Neil Lehr Cadillac and currently is occupied by three tenants in six separate buildings.

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Santa Catalina Co LP purchased the 78-unit Vernon Vista Apartments in Bakersfield (2401 Eric Way) for more than $6.6M. The property, which is within walking distance to three colleges, traded for $130k over list price. Tony Azzi of Azzi Advisors repped seller Vernon Vista Holdings along with Arash Behnam. He notes the Bakersfield market has picked up due to LA's low rate of return. Wonder Dog Realty's Nick Henke repped the buyer.

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Khuri Enterprises sold a 43k SF free-standing industrial building in Glendale (1219 Los Angeles St) to a private buyer for just over $6.9M or $160/SF. CBRE's David Harding and Greg Geraci repped the seller, while Specialized Realty's Artak Dovlatian repped the buyer, who is relocating from Sun Valley.

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Palm Investment Group bought a 93-acre parcel in Palm Springs, occupied by a wind farm, from Chem Quest for nearly $1.6M. Lee & Associates-LA North/Ventura's John Battle and Matt Benwitt transacted the sale with assistance from Brian Ward of Lee & Associates-Palm Desert. The property is located at the Indian Canyon Drive exit off Highway 10. Windpower Partners 1993, a subsidiary of NextEra Energy Resources LLC, operates the wind farm under a 34-year easement.

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Canyon Catalyst Fund and Pacshore Partners acquired a pair of creative office buildings in Playa Vista and Malibu in separate transactions totaling $36M. Industry Partners' Andrew Jennison, Travis Landrum and Jim Jacobsen repped the buyer and sellers. The Enclave (above), a 32k SF office complex at 22619 Pacific Coast Hwy in Malibu, is the former home of toy company JAKKS Pacific. According to Andrew, the 32k SF office complex is known for its design by noted architect Clive Bridgewater and hillside orientation. In Playa Vista, the JV bought a 39k SF building (12901 Jefferson Blvd) formerly occupied by seller Garbo Holdings, which will undergo a significant core-and-shell reno. According to Industry Partners, which has been retained as leasing agent for both properties, the vacancy rate for creative office space in Playa Vista dropped to 15.2% from 19.3% over the past year.

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Faris Lee Investments' Matthew Mousavi and Joe Chichester repped both sides in the sale of a single-tenant Jack in the Box-leased property in Santa Fe Springs for $3.65M cash. The 2,872 SF building, located at 11442 Telegraph Rd in Santa Fe Springs Promenade, closed at a 4.01% cap rate. The Jack in the Box has operated in the shopping center for 25 years and recently renewed for another 10 years. The seller was Santa Fe Springs Promenade's current owner, a private partnership from Orange County, which purchased the center three years ago.

KUDOS

At the Boy Scouts of America’s LA Area Council's eighth annual Business Leaders’ Breakfast, event chair Tom McDonald of JLL presented the Business Leader of the Year Award to Robert Gates. The former Secretary of Defense and current Boy Scouts national president keynoted the event, which was held at the Millennium Biltmore Hotel in DTLA. The breakfast drew more than 400 from the business community.

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For the second year in a row, US EPA recognized Kilroy Realty Corp as an Energy Star Partner of the Year for commercial landlords that demonstrate organization-wide commitment to energy efficiency. Last year, Kilroy earned the Energy Star label for 36 properties totaling 6.8M SF, and reduced its portfolio's energy use by more than 2% for the third year in a row despite a 1% increase in occupancy. The annual CO2 reduction (over 3.7M kilowatt hours) is equivalent to taking 542 cars off the road for a year or planting 66,061 trees. Kilroy and the other winners will be recognized at an awards ceremony in DC on April 20.

EXECUTIVE NEWS

Chauncey Swalwell, formerly with Stroock & Stroock & Lavan, joined Goodwin Procter as a partner in the Real Estate Capital Markets Group in LA. He represents private and institutional investors and lenders in the acquisition, sale, development, leasing and financing of hotels, student housing, industrial parks, office buildings, shopping centers and other projects.

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Jon Spelke, former SVP of land acquisition and development at CA Student Living, joined Storm Properties as director of development. He also will be involved on acquisition activities at Storm, which focuses on core-plus to value-add retail and industrial properties in major Western metros. He's developed over 2.8M SF of retail, industrial and office properties, 900 residential units, and a 320-room hotel.