Blackstone Strikes Deal for Burbank Portfolio
(SEE CORRECTION BELOW) Blackstone has agreed to buy majority stakes in six Los Angeles-area office properties valued at up to $1.5 billion.
The Class-A properties, in Burbank, Calif., encompass some 3.25 million square feet. The interests are being sold by a variety of firms in separate partnerships with investor Jeffrey Worthe. The purchase price couldn’t be learned, but the portfolio is estimated to be worth $1.25 billion to $1.5 billion, or up to $460/sf.
It’s believed that Blackstone will own the overwhelming majority of equity in each property. Worthe’s partners will cash out, and Worthe will retain small interests and continue as the property manager. Eastdil Secured is arranging the recapitalization for Worthe, who operates via Worthe Real Estate of Santa Monica, Calif.
Worthe, the son-in-law of prominent Santa Monica developer M. David Paul, spent years building up the Burbank portfolio. In 2014, he told the Los Angeles Times he owned roughly 70% of the city’s office space. The submarket has historically been one of Los Angeles County’s top performers, thanks to its popularity with media firms.
The largest property in the portfolio is the 994,000-sf Burbank Studios, at 3000 West Alameda Avenue. Worthe and Stockbridge Capital of San Francisco bought that complex in 2007 for $249.6 million. The Class-A property encompasses offices, production space, flex space and sound stages.
Blackstone is also recapitalizing Pinnacle 1&2, at 3300 and 3400 West Oliva Avenue, which Worthe owns in a joint venture with Hudson Pacific Properties of Los Angeles. That duo bought the 394,000-sf Pinnacle 1 in late 2012 for $139.8 million from an M. David Paul & Associates partnership, which the next year sold them the adjacent 230,000-sf Pinnacle 2 for $130 million.
The portfolio also includes the 481,000-sf Pointe office building, at 2900 West Alameda Avenue, which Worthe developed in 2009. His partner or partners in the property are unknown.
Also being recapitalized is the 489,000-sf Tower Burbank, at 3900 West Alameda Avenue. Worthe and Los Angeles fund operator PCCP bought that property in 2014 from BlackRock for $109 million. The 31-story building is the tallest in Burbank.
Rounding out the portfolio are the 249,000-sf Central Park at Toluca Lake, at 3500 West Olive Avenue, and the 422,000-sf Disney Building, at 3800 West Alameda Avenue. Central Park was developed by M. David Paul in 1985. It’s unclear if Worthe was a development partner or later assumed a stake in the property. A partnership led by M. David Paul bought the Disney building from Walt Disney Co. in 2007 for $165 million.
CORRECTION (8/17/17): This article incorrectly included the 994,000-square-foot Burbank Studios in a portfolio that Blackstone is acquiring. The fund shop is buying majority stakes in five Burbank, Calif., properties, not six. The portfolio encompasses 2.25 million square feet.