The Weather's Cold, but Valley Sales are Hot

LOS ANGELES-December is barely half over, but investors have already announced the closing of more than $250 million of purchases in and around the sprawling San Fernando Valley, even as brokers say the area’s string of double-digit annual increases in office rents is coming to an end.

In Valencia, about a 15-minute drive from the Valley’s northern rim, Newhall Land & Farming Co. says it has sold four office buildings on Town Center Drive totaling nearly 400,000 sf to the California State Teachers’ Retirement System for $72.3 million in cash. The buildings include the corporate headquarters of Princess Cruises, which moved to the area in 1999 from pricier West Los Angeles.

CalSTRS bought the properties, which are more than 90% leased, through an investment program managed by LA-based Thomas Properties Group. Los Angeles-based Cushman Realty’s investment services group represented publicly held Newhall Land & Farming Co., which said in a statement said that the sale price is $7.8 million higher than its own cost to develop the buildings.

“Valencia is an attractive location for companies because of the quality-of-life, easily accessible labor pool and competitive economics,” Ryan Smith, a Cushman Investment Services director who worked on the deal, tells GlobeSt.com. “It was originally a bedroom community, but now it’s expanding into a large business area as well.”

Earlier in the week, GlobeSt.com reported that Woodland Hills-based Adler Realty Advisors Inc. had agreed to pay $24 million for the 156,696-sf Legacy Oaks Corporate Center in Thousand Oaks, another community that’s just beyond the San Fernando Valley. The building is 97% leased, reflecting the area’s steady influx of high-tech tenants.

And in the first week of December, a pension fund advised by J.P. Morgan Investment Management said it has closed its previously announced purchase of the 24-story, 532,000-sf Glendale Plaza in Downtown Glendale. Brokers tell GlobeSt.com the property, which started on a speculative basis about three years ago but now nearly 100% occupied, fetched nearly $130 million.

All this activity comes amid signs that office rents in the San Fernando Valley itself are starting to level out after nearly three years of annualized gains in the 10% range. A recent report by LA-based Colliers Seeley International says that rents in the area should rise a more modest 5% in 2001, as the economy cools and more new space comes online.