Leased Build-to-Suit Goes for $11M

HOLLYWOOD, CA-An investment group based in Santa Monica has paid $11 million for a new fully leased 19,350-sf office building at 1122 N. Vine St. The building was developed as a build-to-suit for the Social Security Administration on a site that stood vacant for 10 years after a former Carpeteria store there burned down. The build-to-suit, the lease and the sale were engineered by brokers Mike Howard and Joel Hewson of Commerce CRG in Salt Lake City.The sale of the building to the Santa Monica Group was the culmination of a process in which Howard and Hewson took on an assignment that no one else wanted, found the development site for the government agency, oversaw the project and signed the Social Security Administration to a 15-year lease before selling the property.According to Howard and Hewson, the SSA found no takers when it first started looking for a new Hollywood office in 2002 and issued a solicitation for offers. When the SSA tried again with a second solicitation in 2003, Hewson and Howard heard about it and traveled to California to find the right property. Howard was familiar with Los Angeles from his 24 years here with Grubb & Ellis, including stints managing the Sherman Oaks and North L.A. County offices.The two Salt Lake City brokers formed Hewson Properties/Vine LLC to buy the site that would ultimately become the SSA office. The site is just north of the corner of Santa Monica and Vine.Hewson and Howard then hired the entire development team to construct the new Social Security building, secured a commitment for the construction loan, acquired the permits and oversaw the development. Terms of the SSA's 15-year lease for the building were not disclosed, but it is believed to be a $15-million deal.After securing the lease, Hewson Properties/Vine LLC marketed the building for sale. In addition to Hewson and Howard, whose Salt Lake City-based firm is an Alliance Member of Cushman & Wakefield, the selling entity was represented by Michael Ross, Steve Nanino and Fred Cordova of Colliers International. The buyer was represented by Jon Swire of the ReMax West Los Angeles office.In finding and filling the space requirement for the SSA, Howard and Hewson worked with the federal General Services Administration, the federal agency that is responsible for leasing space on behalf of government entities. The Commerce CRG brokers say that working with such a large government entity was "intensely complex," but they learned much in the process and they now are pursuing other US government development and investment deals.Howard and Hewson have recently closed on the purchase of a development site for another Social Security Administration building in Garden Grove, where construction is scheduled to begin in May, and they are also negotiating several other GSA transactions in the West.