PASADENA, CA-Morgan Stanley Real Estate Investing and Lincoln Property Co. have acquired the 950,000-square-foot headquarters campus of engineering firm Parsons Corp. in an off-market transaction that is the largest single office property sale in L.A. County since 2007 and a sign of rapidly increasing office sales volume in the county. Terms of the sale were undisclosed, but sources not involved in the transaction say that the buyers paid $320 million for the Parsons property, which the engineering firm has leased back for 15 years.
Vice chairman Kevin Shannon of CB Richard Ellis, who represented the buyers, tells GlobeSt.com that the deal was the largest office sale in L.A. County since the $327 million sale of the AON Center in Downtown Los Angeles in 2007. The Parsons sale is also believed to be the largest office sale this year in the Western US, Shannon says. He points out that the Parsons deal is part of a larger trend in which office sales volume for the first six months of this year in Los Angeles County has already slightly exceeded the total for all of 2010. The total for 2010 was $1.531 billion, and the total for the first six months of this year, including the Parsons sale, is $1.538 billion.
“We bottomed out in ‘09, and then velocity picked up last year,” Shannon said. “This year, we are getting closer to 2005 levels. There is clearly more optimism and more capital out there.”
Although the Parsons property sold in an off-market transaction, Shannon says the buyers were one of two or three groups chasing the campus, which is a 22.7-acre complex including three buildings, as well as two parking structures and surface parking. The buyers, as well as the others who were vying for it, sought the property for its “great credit tenant and a great Old Town Pasadena location with tremendous barriers to entry,” Shannon said. Founded in 1944, Parsons is an engineering, construction, technical, and management services firm with revenues of $2.7 billion in 2010, according to the company's web site.
John Klopp, co-CEO and co-chief investment officer of Morgan Stanley Real Estate Investing called the acquisition “a strategic complement to our existing portfolio because of its excellent location, strong tenants and potential for future development,” which includes entitlements for about 900,000 square feet of additional space.
Investment sales of office buildings are increasing in Los Angeles despite a leasing market that, although improving, is lagging other regions in its pace of recovery, according to Shannon. “People who are buying in L.A. are looking at what’s happening in other parts of the country and seeing that other global gateway markets are showing signs of recovery. We are just lagging the cycle,” Shannon explains. He says that although Los Angeles County is lagging in office leasing recovery in comparison with markets like Seattle, San Francisco and Manhattan, L.A. has posted positive absorption and buyers are optimistic that leasing will improve here as well.
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