LOS ANGELES-The sale of the US Bank Tower Downtown by MPG Office Trust to Beringia Central LLC, a wholly owned US subsidiary of Singapore-based Overseas Union Enterprise Limited, on which GlobeSt.com reported earlier this week, is being seen by CRE office executives as a plus for the area and the office market in general. Several industry insiders tell GlobeSt.com that the trade, which is set to close June 28, is a positive step if only because it diversifies the number of owners in the L.A. office playing field.
The new owner, for which the tower is its first US investment, is pleased with the way the US commercial real estate market is looking and sees interesting opportunity in the US market relative to Asia. Downtown L.A. is a market of particular interest to this group. “We're very optimistic about Downtown,” Richard Stockton, the locally based president and CEO for OUE for the Americas, tells GlobeSt.com. “We like what we see in terms of the revitalization of the area. We like what's happening in the entertainment district. We'd like to see more residential units being built and occupied. Downtown Los Angeles is going through a bit of a Renaissance, attracting more employers to the area. We hope to be part of that and continue to drive it in the right direction.”
With $7.5 billion in assets, OUE can clearly bring financial strength to the building, the tallest one west of the Missisippi, which is roughly 40% vacant currently. “Our strategy is clearly a value-added strategy,” says Stockton. “We don't buy dry assets or core low-yielding assets. The US Bank Tower gives us the opportunity to entice tenants to the building by perhaps doing some upgrades.”
Stockton says OUE would like to work with tenants on their needs and generate returns that way. “We'll take over with our current strategy of approaching blue-chip tenants across various employment sectors and getting them interested in the building. We're better able to partner with our tenants and invest capital in the space than our competitors, which may differentiate ourselves from them.”
Industry executives outside of the deal are also enthused by the trade. Michael Zietsman, managing director of capital markets for Jones Lang LaSalle, tells GlobeSt.com that the trade is “a great thing for our market. There haven't been very many high-quality office buildings that have come on the market in the last couple of years. The fact that an asset the quality of the US Bank Tower is generating interest that's not just domestic but offshore is pretty deep. There's been big interest [in our market] from Asia, Europe, Canada and the Middle East. There's a lot of capital chasing real estate.”
Zeitsman adds that the trade is “a little boost for Downtown. It's a good thing to have an international investor buying into one of our core office buildings. They obviously see the opportunity to create a lot of value.”
Hans Mumper, managing director, Greater Los Angeles for Colliers International, tells GlobeSt.com that the sale is significant on a couple of fronts. “Having Singapore money come in and take down one of the iconic towers is great. I also think it being one of the MPG Office Trust portfolio buildings is also significant because we'll have more diverse ownership Downtown, which will allow more deals to happen. With the financial issues MPG was going through, lease deals weren't being done as smoothly as they could. Now, a greater velocity of transactions is going to start occurring.” He adds that the trade may spawn interest from companies outside of Downtown L.A. to move into the submarket.
Nico Vilgiate, Colliers International's recently appointed EVP in its Downtown L.A. office, tells GlobeSt.com, “What's most significant is that it's a fresh new owner to Downtown L.A. and adds some ownership diversity in terms of potentially creating a more competitive environment for tenants to lease up properties to tenants looking for space Downtown.”
Vilgiate has had previous experience subleasing space in the tower back in the '90s. “Tenants showed a lot of interest due to the trophy-asset addresses as well as the location in the heart of Downtown.
The tower is also iconic for being an “establishment-shot” building for Los Angeles used in several contemporary Hollywood movies.
What are your thoughts on the US Bank Tower sale and its impact on the market? Tell us about it in the box below.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
