December 20, 2017— Olive Hill Group, LLC, a Los Angeles-based private investor, operator and developer of commercial real estate, is acquiring 520 Broadway – a rare Class A office building encompassing 112,987 square feet in Downtown Santa Monica – for $117 million, according to Michael Cho, President of Olive Hill Group.
The property has been named BOMA of Greater LA’s “Outstanding Building of the Year” in both 2014 and 2017.
“This is a unique investment opportunity in a very supply constrained region of Silicon Beach,” says Cho.
“520 Broadway is the only building of this size in the Downtown area not held by long-term ownership. Future acquisition opportunities in Santa Monica will be rare, which strategically positions this property to perform well over time.”
Cho explains that stringent development limits imposed by the City of Santa Monica in the 1980s have stifled office development in the market. As a result, there are currently no proposed new office developments within the Downtown region.
“Lack of supply will drive long-term demand for 520 Broadway, which also benefits from the tremendous growth of Silicon Beach, which continues to emerge as a hub for the technology, entertainment, and digital information industries,” says Cho who notes that the submarket is home to tech giants such as Google, Facebook, Snapchat, SpaceX, Amazon, and Microsoft.
In fact, tech funding in Los Angeles has expanded for the fifth year in a row, according to Tim Lee, Vice President of Corporate Development and Legal Affairs for Olive Hill Group.
“Last year, the tech sector in LA raised $4.2 billion, which was a 38 percent increase from 2015,” says Lee. “We expect this number to continue to climb, attracting more and more tech startups and companies to the region.”
According to Lee, “Santa Monica is a top performing gateway market that is poised for long-term growth. Average asking rental rates in Santa Monica have reached new peaks, finishing the third quarter of 2017 at $6.04/per square-foot, per month, according to Transwestern’s most recent quarterly report.”
Constructed in 1981, the 520 Broadway office building underwent $13.2 million in renovations in 2013. At the time of Olive Hill’s acquisition, the asset was 82 percent occupied.
“The newly renovated asset provides strong upside potential as we lease the remaining vacant space,” says Lee. “Demand for office space in Santa Monica is the most competitive in the LA area and we have already received three offers to lease space in this building since we entered into the purchase and sale contract. Over the past 15 years, Santa Monica office occupancy has averaged roughly 90 percent, which is demonstrative of the strong and consistent demand throughout the region.”
520 Broadway is located within walking distance of the recently opened Santa Monica Light Rail Station, high-end retail developments including Third Street Promenade and Santa Monica Place, and nearly 350 new luxury multifamily units. Amenities include a four-story subterranean parking structure, 24-hour manned security, and a newly renovated exterior plaza.
“This acquisition adds an award-winning premier trophy asset to our portfolio and will expand our presence in Silicon Beach,” adds Lee, who notes that Olive Hill Group plans to hold the property long-term. Olive Hill Group also owns The Courtyard at Corporate Pointe, located in Culver City, California.
The property is located at 520 Broadway in Santa Monica, California. Eastdil Secured represented Olive Hill in this transaction.
Steven Edwards & Grace Winters of Manatt, Phelps & Phillips, LLP represented the buyer as legal counsel in this transaction.