Hackman's Big Investment in El Segundo

LOS ANGELES—Hackman Capital Partners is joining the creative office revolution in El Segundo. The investor has acquired a 23-acre land site with four existing buildings in El Segundo, an emerging creative office market that is a perfect fit for the investor's infill strategy. Hackman will redevelop the existing 550,000-square-foot industrial properties into a creative office, and the site has the potential to develop another 1.3 million square feet of creative office. The property was part of a larger 84-acre complex, owned by Northrop Grumman, which will continue to own and operate the remaining portion of the property. El Segundo has become a prime location for creative office development in the past few years, supplying an option to tenants that have been priced out of adjacent markets. To find out why this was a good opportunity for the investor, how it plans to compete with other developments in the market and about its general redevelopment strategy for projects like this, we sat down with Brent Iloulian, general counsel for Hackman Capital Partners, for an exclusive interview.

GlobeSt.com: What is your vision for this project? 

Brent Iloulian: The property represents a unique opportunity to acquire over 23 acres in an infill location and has existing improvements well suited to conversion to creative office, including sawtooth roofing, high ceiling heights and existing office space. It also has significant excess land to create a campus feel, add additional parking and develop additional square footage. The current zoning rights allow for a 1.3 Floor Area Ratio, a wide range of uses and up to a total of about 1,300,000 square feet.  There are multiple redevelopment options for us here.

GlobeSt.com: What is your interest in the El Segundo market?

Iloulian: The El Segundo market fits squarely into our acquisition strategy.  It is a prime infill location in the pathway of growth, which is benefiting from a strengthening Los Angeles economy, notably in the technology-driven submarkets of West Los Angeles and nearby Silicon Beach. As these adjacent submarkets continue to tighten, particularly in Playa Vista, tenants are focusing on El Segundo because of its access and direct transportation options, extensive and expanding amenity base, proximity to executive housing, and synergies with other South Bay companies. Traditionally El Segundo has been the home to leading companies in the aerospace and defense sectors, but now it is emerging as a destination of choice for technology, entertainment and media companies. Additionally, both large prominent businesses and small growth oriented companies are attracted to the benefits of El Segundo's more affordable rental rates and lower overall costs of doing business. This property is adjacent to the 105 Freeway and LAX, 10 miles from the Venice/Santa Monica area, 6 miles from Playa Vista and 9 miles from Culver City. The property is also immediately adjacent to the new Metro Crenshaw/LAX transit line station and the Metro Green Line stations providing public transportation from LAX to downtown Los Angeles and beyond.

GlobeSt.com: There has been a lot of creative office development there. Any concern at all about competition, or is there enough demand to absorb all the spaces?

Iloulian: The El Segundo market has seen an influx of demand for creative office, providing incentive for owners to convert older office and industrial buildings or construct new. Competition is always a likely scenario in a good submarket, but we have found that the well-executed projects that can produce a campus environment will succeed and lease quickly.  In order to generate that best in class type of product, our acquisition strategy focuses on a number of factors, including, good location, easy access to transportation, high parking ratio, high level of authenticity of the existing improvements and relation to population centers.  This new acquisition contains all of those elements.  Additionally, we anticipate demand remaining strong as El Segundo offers a quick commute for corporate decision makers from the South Bay drawn by the high-quality of life, proximity to the beach and executive housing, and quality school districts throughout Manhattan Beach, Hermosa Beach, and Palos Verdes.  We expect further rent growth and continued strong absorption rates based on pressure from adjacent markets and lack of overall supply.

GlobeSt.com: What is your long-term business plan for the property?

Iloulian: As we continue to discuss leasing options with many different types of users, we will evaluate all potential strategies.  Typically, when we find a property of this unique nature and size that contains so many of the elements of our strategy, we like to hold it long term.  Northrop Grumman is leasing back the property for a short period of time, and in the interim we have engaged our leasing team at CBRE to commence its marketing efforts.  Although there are multiple options, at minimum we plan a value-add renovation of the existing buildings into a state-of-the-art creative-office campus. However, we also have the option to develop the vacant land with new buildings and additional square footage.

GlobeSt.com: How has your acquisition strategy for these redevelopment projects changed, and is it becoming more difficult to find redevelopment sites? 

Iloulian: Our acquisition strategy with respect to the type of projects we buy has remained the same.  We seek infill industrial and other asset class opportunities in a market pathway of growth, where we feel there is a long-term strategy to convert those projects to creative office or higher and better uses.  Market conditions have of course made it more difficult to purchase projects in a marketed process at a reasonable basis.  This has resulted in us focusing more time to identify purchases in off-market situations.

LOS ANGELES—Hackman Capital Partners is joining the creative office revolution in El Segundo. The investor has acquired a 23-acre land site with four existing buildings in El Segundo, an emerging creative office market that is a perfect fit for the investor's infill strategy. Hackman will redevelop the existing 550,000-square-foot industrial properties into a creative office, and the site has the potential to develop another 1.3 million square feet of creative office. The property was part of a larger 84-acre complex, owned by Northrop Grumman, which will continue to own and operate the remaining portion of the property. El Segundo has become a prime location for creative office development in the past few years, supplying an option to tenants that have been priced out of adjacent markets. To find out why this was a good opportunity for the investor, how it plans to compete with other developments in the market and about its general redevelopment strategy for projects like this, we sat down with Brent Iloulian, general counsel for Hackman Capital Partners, for an exclusive interview.

GlobeSt.com: What is your vision for this project? 

Brent Iloulian: The property represents a unique opportunity to acquire over 23 acres in an infill location and has existing improvements well suited to conversion to creative office, including sawtooth roofing, high ceiling heights and existing office space. It also has significant excess land to create a campus feel, add additional parking and develop additional square footage. The current zoning rights allow for a 1.3 Floor Area Ratio, a wide range of uses and up to a total of about 1,300,000 square feet.  There are multiple redevelopment options for us here.

GlobeSt.com: What is your interest in the El Segundo market?

Iloulian: The El Segundo market fits squarely into our acquisition strategy.  It is a prime infill location in the pathway of growth, which is benefiting from a strengthening Los Angeles economy, notably in the technology-driven submarkets of West Los Angeles and nearby Silicon Beach. As these adjacent submarkets continue to tighten, particularly in Playa Vista, tenants are focusing on El Segundo because of its access and direct transportation options, extensive and expanding amenity base, proximity to executive housing, and synergies with other South Bay companies. Traditionally El Segundo has been the home to leading companies in the aerospace and defense sectors, but now it is emerging as a destination of choice for technology, entertainment and media companies. Additionally, both large prominent businesses and small growth oriented companies are attracted to the benefits of El Segundo's more affordable rental rates and lower overall costs of doing business. This property is adjacent to the 105 Freeway and LAX, 10 miles from the Venice/Santa Monica area, 6 miles from Playa Vista and 9 miles from Culver City. The property is also immediately adjacent to the new Metro Crenshaw/LAX transit line station and the Metro Green Line stations providing public transportation from LAX to downtown Los Angeles and beyond.

GlobeSt.com: There has been a lot of creative office development there. Any concern at all about competition, or is there enough demand to absorb all the spaces?

Iloulian: The El Segundo market has seen an influx of demand for creative office, providing incentive for owners to convert older office and industrial buildings or construct new. Competition is always a likely scenario in a good submarket, but we have found that the well-executed projects that can produce a campus environment will succeed and lease quickly.  In order to generate that best in class type of product, our acquisition strategy focuses on a number of factors, including, good location, easy access to transportation, high parking ratio, high level of authenticity of the existing improvements and relation to population centers.  This new acquisition contains all of those elements.  Additionally, we anticipate demand remaining strong as El Segundo offers a quick commute for corporate decision makers from the South Bay drawn by the high-quality of life, proximity to the beach and executive housing, and quality school districts throughout Manhattan Beach, Hermosa Beach, and Palos Verdes.  We expect further rent growth and continued strong absorption rates based on pressure from adjacent markets and lack of overall supply.

GlobeSt.com: What is your long-term business plan for the property?

Iloulian: As we continue to discuss leasing options with many different types of users, we will evaluate all potential strategies.  Typically, when we find a property of this unique nature and size that contains so many of the elements of our strategy, we like to hold it long term.  Northrop Grumman is leasing back the property for a short period of time, and in the interim we have engaged our leasing team at CBRE to commence its marketing efforts.  Although there are multiple options, at minimum we plan a value-add renovation of the existing buildings into a state-of-the-art creative-office campus. However, we also have the option to develop the vacant land with new buildings and additional square footage.

GlobeSt.com: How has your acquisition strategy for these redevelopment projects changed, and is it becoming more difficult to find redevelopment sites? 

Iloulian: Our acquisition strategy with respect to the type of projects we buy has remained the same.  We seek infill industrial and other asset class opportunities in a market pathway of growth, where we feel there is a long-term strategy to convert those projects to creative office or higher and better uses.  Market conditions have of course made it more difficult to purchase projects in a marketed process at a reasonable basis.  This has resulted in us focusing more time to identify purchases in off-market situations.