The $15 billion Alaska Permanent Fund, Juneau, and the $5.7 billion endowment for Harvard University paid $100 million for an interest in Warner Center Plaza and the Warner Center Business Park, a complex of high-, mid- and low-rise office buildings in Woodland Hills, Calif., a suburb of Los Angeles.
The interests in the buildings were bought at a discount to replacement of about 30%, said Paul Saylor, principal with Chadwick, Saylor & Co. Inc., Los Angeles, which represented the Alaska Permanent Fund.
Alaska's share of the investment is $67 million, according to Llewellyn Lutchansky, assistant real estate investment officer. The balance is owned by Harvard.
Jack Meyer, president of Harvard Management Co., Boston, the university's asset management division, declined to comment, explaining the fund does not discuss individual investments.
The seller was The New England Mutual Life Insurance Co., Boston. The insurer will retain a share in the properties valued at $66 million, said Kevin Mahoney, managing director with Copley Real Estate Advisors, which will serve as adviser to the investors.
The investors have an option to purchase The New England's share in the next three years, said Mr. Mahoney.
Due diligence on the complex was performed by independent fiduciaries because of Copley's ties to The New England.
Copley is owned by the New England Investment Companies L.P., a publicly traded company whose largest shareholder is The New England. The real estate adviser previously served as The New England's adviser on the Warner properties, but resigned in December 1994 when The New England decided to sell.
The New England and The Voit Cos., Woodland Hills, Calif., developed the complex in phases, dating back to the 1970s.
In addition, the $133 billion Teachers Insurance and Annuity Association-College Retirement Equities Fund lent $120 million to the investors that went to refinance the property. The loan can grow to $141 million as the Plaza III building - one of the office towers - is leased up, said Mr. Mahoney. The extra $21 million would be used for tenant improvements and leasing commissions, he said.
The complex encompasses five high-rise office buildings with 1.8 million square feet of space; and two midrise and 26 low-rise buildings with about 800,000 square feet of space, according to Mr. Mahoney.
Plaza III, one of the towers in the complex, is 90% vacant, said Mr. Mahoney. The complex has an overall occupancy rate of 80%; the occupancy rate would jump up to about 94% if Plaza III were taken out, said Mr. Mahoney.
Many of Los Angeles' office submarkets have strengthened, according to real estate professionals. But the improvements have not occurred evenly throughout the region.
Downtown Los Angeles has a vacancy rate between 21% and 22%, said Howard Sadowsky, executive vice president in the Los Angeles office of Julien J. Studley, a leasing and management company. Burbank, Beverly Hills and Santa Monica, by contrast, are tight, said Mr. Sadowsky.
Now it is the San Fernando Valley's turn.
Lease rate renewals in the San Fernando Valley began to rise in late 1994 and early 1995, said Mr. Saylor.
Vacancies in the San Fernando Valley are 15% to 16%, down from 19% about two years ago, said Mr. Sadowsky. Eighty-five percent of the space to be had in the area is in the Warner complex, he said, noting one of the five towers in particular is empty.
"I expect most of it (vacant space) to be spoken for within a year," he said.
Mr. Saylor said he expects entertainment-related companies to lease space in the San Fernando Valley. Mr. Sadowsky said insurance, financial and computer-related companies also will lease space there.
