By Jennifer LeClaire | GlobeSt.com
MIAMI—“One City Block, A Thousand Stories.” So proclaims the tagline of the PacMutual, a 464,000-square-foot, three-building complex, that has become the hottest property in downtown Los Angeles.
But, Tom Silva, principal of Silva, tells Globest.com, it wasn’t that way three years ago. Rising Realty Partners acquired the property at 6th and Olive streets for $60 million in 2012. At the time, he explains, it was a class B office alternative for conventional white-collar firms with an occupancy of barely 50%.
“What’s more, the Beaux Arts building had lost its cachet beneath drywall and dropped ceilings which obscured its splendor,” Silva says. “But Rising recognized the brand that lay underneath: Built by The Pacific Mutual Life Insurance Company after the San Francisco earthquake, the large-floorplate, high-ceilinged structures were fire and earthquake proof, with a buildout of steel, hard burned hollow tile, concrete and white glazed terra cotta. Seeing the potential, Rising spent $25 million on repositioning and rebranding the building.”
The Los Angeles developer moved to strip away the ill-conceived "improvements" made after World War II, which revealed brick walls, concrete floors and even some windows that had been covered for many years. By reconfiguring and recapturing idle space, Silva explains, the company raised the amount of rentable square feet 9% to 464,000.
"This building was meant to have high ceilings and a high volume of light," says Chris Rising, president of Rising Realty. "By pulling it back to a sense of what it was like in 1920s or '30s, we had people saying 'I'll pay for this.'"
Rebranded as PacMutual, the new offices also given a benign image as both historically significant and environmentally friendly through features like an 80-foot-tall living wall, as well as a designation as a City of Los Angeles Historic-Cultural Monument. Finally, Silva says, the company made a counterintuitive move by repositioning it as a creative space in a market that was dominated by banking, legal and accounting firms.
“To do this effectively, the company took some risks with the leasing strategy, landing edgier tenants that included Nasty Gal, an online fashion retailer known for selling provocative women's wear,” Silva says. “The new brand was expressed through a crisp new website that featured a mix of archival and full-bleed color photography, stylish sans serif fonts and an open, airy design that foregrounded the brand idea of "lifestyle office.”
So, did it work? When Rising picked up the building, leases were being signed at $1.80 per square foot. Today, rents start at $4 per square foot, making it downtown LA's priciest building—exceeding typical rates in much newer nearby skyscraper—and it is 95% leased.
But that’s not where the story ends. Silva explains that the denouements of the whole rebrand came in the 3rd quarter of this year when Canadian-based Ivanhoé Cambridge and its partner Callahan Capital Properties of Chicago purchased PacMutual for approximately $200 million. That’s a $115 million profit.