The US division of Singaporean developer OUE has put US Bank Tower, the second tallest building in Los Angeles, on the market for a reported $700 million in a deal which, if concluded at the asking rate, would be the largest commercial real estate transaction in the city since October last year.
The Singapore-based developer expects to find a buyer before the fall, OUE USA senior vice president Peter Johnston told local media outlet Los Angeles Downtown News.
While OUE has not yet publicly confirmed its asking price for the 1.4 million square feet (130,000 square metre) building, media outlets indicate that the company is looking to lock in a $500 per square foot price (approximately $5,381 per square meter), which would bring the building’s total cost to $700 million, a 90 percent premium over the $367.5 million it paid to acquire the tower in 2013.
Resurrecting a Distressed Landmark
Should the proposed sale be completed, the transaction would formalize a successful turnaround for an asset which OUE bought in what some analysts would term a distressed sale more than five years ago.
In 2012 the building was “in danger of an imminent default” on its $260 million mortgage under its then owners, MPG Office Trust, who had transferred loans associated with the asset to a debt workout firm, according to a Fitch Report cited by the Wall Street Journal.
Since purchasing the 300-metre tower, OUE has made improvements valued at $50 million, including adding an observation deck, a glass slide, and a giant LED screen. Occupancy rates shot up from 50 to 85 percent since the improvements were made, OUE USA’s Johnston told Los Angeles Downtown News.
According to real estate database Compstak, current tenants in the building include insurance firm Marsh & McLennan, and media companies CBS, and Thomson Reuters.
Ranking Among LA’s Biggest Transactions
The proposed sale, which was first made public in January, would be one of the largest commercial sales in LA in recent history, below Hackman Capital’s $750 million acquisition of CBS Television last October, but surpassing Boston Property’s $627.5 million purchase of Santa Monica Business Park in July of last year, and Rising Realty Partners $460 million purchase of One California Plaza in June of 2017.
In terms of price per square foot, the sale would surpass a recent deal for One California Plaza ($465 per square foot) but trail Santa Monica Business Park, which fetched $522.9 per square foot, and Television City, which went for close to $750 per square feet.
The iconic 72 story structure, formerly known as Liberty tower, has been featured in a number of Hollywood films including the science fiction classic Independence Day, and once housed Arthur Andersen, the former “Big 5” accounting firm that collapsed in the Enron scandal in 2002.
No Peak In Sight
The proposed sale comes as office occupancy rates and rentals across the city near two-year highs. The overall vacancy rates for Greater Los Angeles stood at 14.1 percent in the last quarter of 2018, the lowest since the fourth quarter of 2016, according to CBRE.
Leasing rates in the city were up 3.9 percent year over year at at the end of 2018, reaching an average of $3.37 per square foot per month “supported by declining vacancy, a strong labor market and high levels of pre-leasing at projects under construction,” according to the real estate agency. Rents are now 43 percent above the recent low seven years ago.
Shares of OUE have risen two percent since news of the sale broke last month, providing a much-needed respite to the embattled Singapore developer.
OUE is controlled by the billionaire Riady clan of Indonesia, who also own Lippo Group, one of the largest conglomerates in the archipelago. Stocks and bonds issued by OUE have gone on a free fall after concerns that the group is using money from other entities linked to the Riadys, who were accused of paying bribes to the government in connection to their $21 billion Meikarta real estate project.