Creative Office Breaks Pricing Records

EL SEGUNDO, CA—Montana Avenue Capital Partners has sold the Station, a 53,778-square-foot creative office building in El Segundo to AGI Properties for $31 million, or $580 per square foot. The sales price is one of the highest ever paid in the El Segundo market, beating the previous high by about 80%.

“This is highest price per square foot for an investment building that is over 25,000 square feet,” Steve Solomon, managing director at JLL, tells GlobeSt.com. “This passes the last highest comp in the market by about 80%.” Solomon represented Montana Avenue Capital Partners in the transaction.

Located at 2201 E. El Segundo Boulevard in El Segundo, the property was originally built in the 1960s. Montana Avenue Capital Partners purchased it in 2014 and converted it into a class-A creative office building branded the Station.  Recently, the investor signed an 11-year single-tenant lease with cosmetic group L'Oreal, which will take occupancy at the end of this year. Montana Avenue was waiting to sell the property when the concessions from the lease burned off; however, AGI Properties was looking for an exchange buy after selling a Costco in Torrance. “They want long-term lease credit deals, so the property fit perfectly,” says Solomon. “They were willing to forgo some cash flow early on. The stars were kind of aligned, and it worked out. Stabilized, this would have sold at a 5% cap rate, and they bought it at about a 4% cap rate.”

Montana Avenue Capital Partners is focused on buying properties that can be converted into creative office. Last month, the investor broke pricing records in the Santa Barbara market with its purchase of an oceanfront creative office campus in Carpinteria. Montana Avenue bought the 118,394-square-foot property for approximately $32.5 million, the highest price ever paid for a property in that submarket.

In El Segundo, the firm has even more deals underway, including the Landing, a 100,000-square-foot creative conversion at 2040 E. Mariposa Avenue; LINQ on Marine, a 50,000-square-foot creative office conversion at 2400 Marine; and a second 50,000-square-foot creative office conversion at 621 Hawaii Street.