Would you pay $1.4B to buy 1.4M SF of transit-accessible office space in Santa Monica?

JP Morgan Asset Management thinks someone will.

It engaged Eastdil Secured to market its Water Garden property in the coastal city and anticipates that the bids could go up to $1.4B, Green Street reports.

Commercial Observer reported earlier this month that the property was up for sale but the pricing information is a new indicator of what the finance giant thinks it can get, even in a challenging market.

This year so far, Green Street says the average valuation on trades worth at least $25M is $505 per SF, according to its database. That’s down 20% from the 2021 average of $629 per SF and far below the $1K per SF that JP Morgan thinks it could get for this property.

Green Street notes that the last sale of that size that closed was the March sale of One Manhattan West, a 2.1M SF property in New York City that Blackstone bought for $1.4B.

The Water Garden property at 1620 26th St. in Santa Monica is across the street from the E Line light rail stop. Its tenants include Amazon, which inked a lease for 200K SF earlier this year, and Sony. The eight-building property is 84% leased, according to CO.

The Water Garden hits the market at a rough time for the office market overall. According to a report from Savills, Q3 2022 office availability has risen to an “all-time high” of 25.4% and sublease space is reaching a similarly historic high of 9.6M SF. Nationally, 18% fewer office leases were signed in Q3 of this year than this time last year, and the lease terms and square footage of the leases that were signed dropped.

In the face of these disheartening data points, big banks and financial institutions, including JPMorgan Chase and Deutsche Bank AG, are looking to offload their office loans, some even offering discounts as they seek to reduce their exposure before their values drop even lower, Bisnow has previously reported.