The 6-story office building at 520 Broadway has been sold to a Los Angeles-based private investor for $117 million. The investment firm behind the purchase said the tremendous growth of Silicon Beach and local limits on office development made the 1980’s building a “trophy asset.”
“This is a unique investment opportunity in a very supply constrained region of Silicon Beach,” said Michael Cho, President of Olive Hill Group. “520 Broadway is the only building of this size in the Downtown area not held by long-term ownership. Future acquisition opportunities in Santa Monica will be rare, which strategically positions this property to perform well over time.”
The property has been named one of Los Angeles’ Outstanding Buildings of the Year by the Building Owners and Managers Association twice (2014 and 2017). The building underwent 13.2 million in renovations in 2013.
Current tenants include shared-office space giant WeWork, which is currently charging about $550 a month for a dedicated desk in the building and $900 per month for a private office. A parking pass in the underground garage currently goes for about $250 a month, according to their website.
The 112,822 square foot building is 82 percent occupied, according to a press release by Olive Hill.
“Demand for office space in Santa Monica is the most competitive in the LA area and we have already received three offers to lease space in this building since we entered into the purchase and sale contract,” said Tim Lee, who is vice president of corporate development and legal affairs at the firm. “Over the past 15 years, Santa Monica office occupancy has averaged roughly 90 percent.”
The building is walking distance from the Expo stop, the Third Street Promenade and hundreds of new apartments that will be coming online over the next few years. The firm is eyeing cash-flushed tech companies to fill up any empty space, noting Los Angeles tech companies raised $4.2 billion in 2016, a nearly 40 percent increase over the previous year.
“We expect this number to continue to climb, attracting more and more tech startups and companies to the region,” Lee said.
Santa Monica’s newly adopted Downtown Community Plan (DCP) estimated overall office occupancy downtown at 94 percent, compared to 90 percent for Los Angeles County as a while. Because of the demand and proximity to the beach and shopping, rents here are about 60 percent higher than the County average.
“This is true despite the aging quality of the office supply, in part because the continued increases in demand for space exists in an environment in which there has been almost no additional office space added in the last 20 years,” reads the DCP. Lack of space pushed Google and Riot Games out of the city. The plan tries to focus construction of new office space along the Expo Line to mitigate the traffic impact of any expansions.
Olive Hill Group has purchased more than $2.4 billion of commercial assets since forming in 1996.
The same building sold to a New York firm just two years ago for over $90 million, according to a 2015 report in the Los Angeles Times. At the time, tenants included the Xbox video gaming division of Microsoft Corp., television and film producer Zodiak USA and Boston Private Bank, according to the report.