By Kelsi Maree Borland | GlobeSt.com
LOS ANGELES—A joint venture between H.I.G Realty Partners, Silverpeak Real Estate Partners and Rising Realty Partners has acquired the Garland Center in Downtown Los Angeles. The sales price of the property was not disclosed, however, industry sources unrelated to the deal tell GlobeSt.com that the joint venture paid $210 million for the property. The property is a 733,000-square-foot office building and data center, and the purchase includes a 1,600-space parking structure.
“The Garland Center is the perfect fit in the Rising portfolio for a couple of different reasons,”Chris Rising, president and COO of Rising Realty, tells GlobeSt.com. “For one, it’s a fully leased building with great credit tenants. Second, the building’s data center infrastructure, capabilities and potential is right in our wheelhouse given our telecom expertise with 5×5 Telecom. Lastly, it’s an underutilized asset in DTLA that was subject to a complex ground lease with three years remaining. At closing, we were able to immediately collapse the ground lease and begin negotiations with the new and existing tenants to sign long term leases, unlocking immediate lease-up and exit value.”
In addition to the sheer size of the deal, this is also an important transaction for the market. Jonathan Larsen, a principal and managing director at Avison Young and a Downtown office market expert who was not involved in this deal tells GlobeSt.com, “This is significant because the property has had its hands tied with the prior ownership structure and was not able to do long term leases. Rising Group has had a great track record of understanding tech, data center and creative office space which Garland Center has as its tenant mix and will continue to expand in the future with a top leasing partner with the relevant experience.”
The joint venture will be rebranding and renovating the property to bring it back to life, as Rising has done with many Downtown Los Angeles assets, namely the PacMutual Building, also in Downtown Los Angeles. “We will be rebranding and taking The Garland Center data center space to the market to attract end users, colocation tenants, and telecom providers seeking connectivity-focused space in the downtown LA market,” adds Rising. “The Garland Center represents one of the only purpose-built data centers in the market. Due to its location, scale, abundance of power, and redundancy, we believe we are well-positioned to maximize the value of the asset.”
Located on 7th Street just west of the 110 freeway, the property was originally built in 1983 for First Interstate Bank. Now that the new ownership will be able to accommodate longer-term leases, the joint venture should easily attract tech tenants migrating to Los Angeles. “For the larger tenants and the available data center space long term, 10-15 year leases are necessary due or the large capital outlay required by both the tenant and landlord,” adds Larsen. “Garland Center has abundant power and fiber connectivity along with excess land and space to add to its tech and data center mix. Rising Group is well positioned to attract the new tech and data center tenants migrating to Downtown L.A. Finally, the mixed-use residential, retail, hotel and office space in the immediate area are all good draws for the future Millennial work force for the building.”