$52M Sale of CNN Tower Nets $18M Gain

The class A office building, also known as Sunset Tower, is 95% leased and sits on a 1.16-acre site at 6430 W. Sunset Blvd. The Sunset and Vine corridor is the focus of more than $1 billion in new retail and residential development and investment. The new development was one of the reasons that SKB, a privately held merchant banking firm, cited when it acquired the property in 2004.

The 14-story building was developed in 1968 and was extensively renovated between 1991 and 2001. The property includes a five-story, above-ground parking structure that provides for an overall parking ratio of 2.65 spaces per 1,000 sf of office space.

The CNN Tower offers upside potential for its new owners, according to Bob Scanlan, founder and managing director of 13-year-old SKB. "Some rents in the building are already below market, and rents will continue to rise in Hollywood over the next few years," Scanlan says.

Broadreach managing director David Simon, who heads the real estate private equity firm's operations in Southern California, cites another reason that the building offers upside: the number of office buildings being converted to housing, thus reducing the office stock. "As a result, we are seeing a continuing decline of quality office space, especially in Hollywood," Simon observes.

Broadreach plans to invest "a significant amount of capital" to improve the building, which Simon says "will attract high end users in the marketplace." For the remodel, which is expected to be completed in the first quarter of 2007, Broadreach has retained HLW as design architects and House Robertson as the executive architects.

Besides CNN, which occupies 16% of the building and has signage rights, tenants include a variety of entertainment and media firms.CNN's lease is coming due and the Time Warner Inc. subsidiary has not yet announced whether it will remain in the building.

Scanlan Kemper Bard was represented by Steve Algermissen and Carl Muhlstein of the Downtown Los Angeles office of Cushman & Wakefield, with Simon representing Broadreach internally. Broadreach has named Robert Waller and Nico Vilgiate of CB Richard Ellis as the leasing agents for the property.